South Dakota Initiated Measure 26, Drug Price Standards Initiative (2018)

South Dakota Initiated Measure 26, Drug Price Standards Initiative
Election date November 6, 2018
Topic Healthcare
Status Not on the ballot
Type State statute	Origin Citizens
List of South Dakota measuresSouth Dakota Constitutional Amendment Y - JuneSouth Dakota Constitutional Amendment WSouth Dakota Constitutional Amendment XSouth Dakota Constitutional Amendment ZSouth Dakota Initiated Measure 24South Dakota Initiated Measure 25Submit

The South Dakota Drug Price Standards Initiative, Initiated Measure 26 was not on the ballot in South Dakota as an initiated state statute on November 6, 2018.

Overview

Initiative design

Initiated Measure 26 would have required the state and state agencies to pay the same or lower prices for prescription drugs as the U.S. Department of Veterans Affairs (VA)—a department that negotiates drug prices with companies and typically receives a 24 percent discount for prescription drugs. Specifically, it would have forbidden state agencies from entering into any purchasing agreement with drug manufacturers unless the net cost of the drug was the same or less than that paid by the VA. The measure would have applied in any case in which the state ultimately provided funding for the purchase of drugs, even if the drugs were not purchased directly by a government agency. The measure would have also given the initiative's circulation committee a direct and personal stake in defending the law from legal challenges.

Drug price measures in California and Ohio

Initiated Measure 26 was similar to California Proposition 61, which was defeated in 2016, and Ohio Issue 2, which was defeated in 2017. Both of these past initiatives were also designed to limit the prices paid for prescription drugs by state agencies to those paid by the VA, and both were sponsored by the California-based AIDS Healthcare Foundation (AHF). This initiative was sponsored by a group distinct from the AIDS Healthcare Foundation, but proponents received funding from AHF.

In California, opponents of Proposition 61 spent $109 million, which mostly came from pharmaceutical companies. The AIDS Healthcare Foundation, founded and run by Michael Weinstein, sponsored the initiative and spent $19 million supporting it. Ultimately, it was defeated by a margin of 53.2 percent to 47.8 percent. The battle between AHF and pharmaceutical companies repeated in 2017 over Ohio Issue 2. The opposition campaign raised $59 million—a record in Ohio—to the support campaign’s $18.3 million. Voters rejected the initiative 79 percent to 21 percent.

State of the ballot measure campaigns

One committee—South Dakotans for Lower Drug Prices—was registered to support the initiative, and one—South Dakotans Against the Deceptive Rx Ballot Issue—was registered to oppose it. South Dakotans for Lower Drug Prices had received $50,000, all from the AIDS Healthcare Foundation. South Dakotans Against the Deceptive Rx Ballot Issue had received $314,416.12. The top opposition donors were Novo Nordisk Inc. ($205,000), Bristol-Myers Squibb ($100,000), PhRMA ($7,976.12), and South Dakota Biotechnology Association ($1,440).

Proponents argued that drug prices are too high and that the initiative would decrease prices. Opponents argued that the initiative would diminish the availability of certain drugs, increase drug prices for private purchasers, and be unenforceable.

Text of measure

Ballot title

The ballot title was as follows:

“

An initiated measure establishing a cap on the price a State agency may pay for a prescription drug.

”

Ballot summary

The ballot summary was as follows:

“

This measure limits the amount that a State agency may pay for a prescription drug. Under the measure, a State agency may not directly or indirectly pay more for a prescription drug than the U.S. Department of Veterans Affairs pays for that same drug. The measure requires the State Bureau of Administration to enact rules establishing prescription drug prices payable by State agencies.

”

Full text

The full text of Initiated Measure 26 is below:

“ For An Act Entitled, An Act to establish a prescription drug pricing law a State Agency to pay the same or lower prices for prescription drugs as the prices paid by the United States Department of Veterans Affairs. BE IT ENACTED BY THE PEOPLE OF THE STATE OF SOUTH DAKOTA: Section 1. Notwithstanding any other provision of law, a state Agency may not enter into any agreement with the manufacturer of any drug for the puicnaie of a prescribed drug or agree to pay, direcfly or indirecfly, for a prescribed drug, unless the net cost of the drug, inclusive of cash discounts, free goods, vorume discounts, rebates, and arl other discounts or credits, as determined by the purchasing department, agency, or entity is the same as or less than the lowest price paid for the same drug u-y tne i.rniteo States Department of Veterans Affairs. Section 2. The price ceiling described in section 1 of this Act applies to all programs in which the state or any of its agencies is the ultimate payer for the drug, even if it does not purchase the drug directly. Section 3. In addition to any agreement for any cash discounts, free goods, volume discounts, rebates, and any other discounts or credits already in place for these programs, the state and its agencies shall enter into additional agreements with drug manufacturers for further price reduction so the net cost of the drug, as determined by the purchasing department, agency, or entity, is the same as or less than the lowest price paid for the same drug by the United States Department of Veterans Affairs. Section 4. The Bureau of Administration shall adopt rules, pursuant to chapter 1-26 to obtain information about prescription drug prices, credits, discounts, rebates, and other price advantages for the purpose of determining the lowest price at which a prescription drug is being offered to the united states Department of Veterans Affairs and to establish the lowest price at which prescription drugs may be purchased by any State Agency. Any state agency may seek waivers of federal law, rule or regulation 'necessary to implement this Act. Section 5. If any provision of this Act is challenged in court, the committee of individuals responsible for circulating the petition to qualify this Act for the ballot are deemed to have a direct and personal stake in defending this Act from constitutional or other challenges. If the Act is challenged, committee members shall be deemed to have legal standing to assert the member's direct and personal stake by defending the Act's validity. ”

Readability score

See also: Ballot measure readability scores, 2018

Using the Flesch-Kincaid Grade Level (FKGL and Flesch Reading Ease (FRE) formulas, Ballotpedia scored the readability of the ballot title and summary for this measure. Readability scores are designed to indicate the reading difficulty of text. The Flesch-Kincaid formulas account for the number of words, syllables, and sentences in a text; they do not account for the difficulty of the ideas in the text. The state legislature wrote the ballot language for this measure. The FKGL for the ballot title is grade level 10.4, and the FRE is 52.3. The word count for the ballot title is 18, and the estimated reading time is 4 seconds. The FKGL for the ballot summary is grade level 8.6, and the FRE is 56.4. The word count for the ballot summary is 32, and the estimated reading time is 17 seconds. In 2018, for the 167 statewide measures on the ballot, the average ballot title or question was written at a level appropriate for those with between 19 and 20 years of U.S. formal education (graduate school-level of education), according to the FKGL formula. Read Ballotpedia's entire 2018 ballot language readability report here.

Support

South Dakotans for Lower Drug Prices led the campaign in support of the initiative. Clara Hart served as the campaign's chairperson.

Supporters

• Rick Weiland (D), candidate for U.S. Senate in 2014
• Michael Weinstein, president of the AIDS Healthcare Foundation

Arguments

• Rick Weiland said, "This is going to be a very interesting campaign with Big Pharma loaded to bear because they don't want this to become a stepping stone to other state efforts to do the same thing." He also said the initiative would save the state “millions of dollars and curtail the drug industry’s price gouging practices.” In a guest column in the Dakota Free Press, Rick Weiland and Drey Samuelson, co-founders of [TakeItBack.org] wrote:

“

...According to Reuters, Americans pay as much as seven times more than British consumers for the same top-selling drugs. ... Other countries use their volume purchasing power to strike deals with drug companies for substantial discounts. We don’t do it in this country because the pharmaceutical companies—Big Pharma—control Congress, and they simply won’t allow it. ... But the one group that Big Pharma gives a pass to are veterans. It benevolently allows the VA to use its purchasing power to get a 24% discount—and sometimes higher—for the drugs that it buys. Don’t get us wrong, the VA—and vets–deserve it, but so do ALL Americans! And that’s why we are strongly supporting the South Dakota Fair Drug Price ballot initiative, which mandates that the State of South Dakota use its purchasing power to buy prescription drugs (for Medicaid recipients, state hospitals, etc.) and get the same negotiated price that the VA pays. If the initiative passes, it will save South Dakota taxpayers millions of dollars—money that could either be rebated back to our citizens, or redirected toward needed projects.

”

• Clara Hart said that pharmaceutical companies "need to have a heart instead of money, money all the time."

Opposition

South Dakotans Against the Deceptive Rx Ballot Issue led the campaign in opposition to the initiative.

Background

California Proposition 61 and Ohio Issue 2

The South Dakota Drug Price Standards Initiative was similar to California Proposition 61, which was on the ballot in 2016, and Ohio Issue 2, which was on the ballot in 2017. Proposition 61 and Issue 2, like the South Dakota initiative, were designed to require state agencies to pay the same prices that the U.S. Department of Veterans Affairs pays for prescription drugs. The measures would have only applied to the purchasing of drugs by state agencies and not to purchases made by individuals. Voters in California rejected Proposition 61 in a 53 to 47 percent vote. Voters in Ohio defeated Issue 2 in a 79 to 21 percent vote.

All three of the initiatives provided proponents with a "direct and personal stake in defending" the initiative. The major difference, however, between the South Dakota initiative, on one hand, and Proposition 61 and Issue 2, on the other, regarded the provision to provide reasonable compensation to the proponents' attorneys for defending the measure. Both Proposition 61 and Issue 2 contained this provision, whereas the South Dakota initiative did not.

An additional difference between the South Dakota initiative and Issue 2, on one hand, and Proposition 61, on the other, regarded Medicaid managed care programs. California Proposition 61 would have exempted from price regulation drugs purchased or procured under Medi-Cal (Medicaid) managed care programs. The South Dakota initiative and Issue 2 would not have provided for an exemption from price regulation drugs purchased or procured under their state Medicaid managed care programs. Medicaid managed care programs are insurance companies or networks of healthcare providers that contract with Medicaid to provide care for Medicaid recipients. People who use Medicaid managed care programs must sign up for plans to receive services. In 2011, about 60 percent of California Medi-Cal recipients, 75 percent of Ohio Medicaid recipients, and 76 percent of South Dakota Medicaid recipients were enrolled in managed care programs.

The AIDS Healthcare Foundation (AHF) was behind the initiatives in California and Ohio. While Michael Weinstein, president of AHF, said he planned to support the South Dakota initiative, AHF did not plan or propose the ballot measure. AHF contributed $19.2 million to the effort in California and $18.3 million to the effort in Ohio. Pharmaceutical Research and Manufacturers of America (PhRMA) opposed both ballot initiatives, with opponents raising $109.1 million in California and $59.1 million in Ohio.

Ohio Issue 2 and VA drug price availability
October 19, 2017: A report funded by Ohio Taxpayers for Lower Drug Prices, which supported the state's ballot measure Issue 2, claimed that it is "unclear" how many VA drug prices are not publicly available, but "it does not seem to be many."
How many VA drug prices are not publicly available? Read Ballotpedia's fact check »

The following table illustrates the similarities and differences, with highlighted differences in italics, between the South Dakota initiative, Ohio Issue 2, and California Proposition 61:

South Dakota Initiated Measure 26, Drug Price Standards Initiative (2018)	Ohio Issue 2 (2017)	California Proposition 61 (2016)
• Forbids state agencies from entering into purchasing agreements with drug manufacturers unless the net cost of the drug is the same or less than that paid by the VA.	• Forbids state agencies from entering into purchasing agreements with drug manufacturers unless the net cost of the drug is the same or less than that paid by the VA.	• Forbids state agencies from entering into purchasing agreements with drug manufacturers unless the net cost of the drug is the same or less than that paid by the VA.
• Applies to all programs where the state is the ultimate payer for the drug, even if it did not purchase the drug directly.	• Applies to all programs where the state is the ultimate payer for the drug, even if it did not purchase the drug directly.	• Applies to all programs where the state is the ultimate payer for the drug, even if it did not purchase the drug directly.
• No equivalent provision excluding Medicaid managed care.	• No equivalent provision excluding Medicaid managed care.	• Excludes drugs purchased or procured under Medi-Cal (Medicaid) managed care.
• No equivalent provision on legislative actions surrounding the initiative.	• Ohio Governor and General Assembly may take any additional actions to promptly carry out the initiative's provisions.	• General Assembly may amend the initiative with a two-thirds vote of both chambers to further its purposes.
• Proponents "direct and personal stake in defending" the initiative and may defend it from legal challenges. No provision to provide proponents with compensation for defending the initiative.	• Defended against lawsuits by the Ohio Attorney General. However, proponents have a "direct and personal stake in defending" the initiative and may defend it in any court. The state shall provide reasonable compensation to the proponents' attorneys for defending the measure.	• Defended against lawsuits by the California Attorney General. However, proponents have a "direct and personal stake in defending" the initiative and may defend it in any court. The state shall provide reasonable compensation to the proponents' attorneys for defending the measure. Proponents defending the measure would not be considered at-will employees, but could be removed from defense by the legislature when good cause exists to do so. Proponents would take the Oath of Office.
• No equivalent provision requiring proponents to pay a civil fine if the initiative is ruled unenforceable.	• If the measure is ruled unenforceable, proponents shall pay a civil fine of $10,000 to Ohio.	• If the measure is ruled unenforceable, proponents shall pay a civil fine of $10,000 to the General Fund of California.

Changes in drug prices

For 2008, Express Scripts Lab (ESL), a branch of the nation's largest prescription-drug benefits administrator Express Scripts, calculated a fixed market baskets for the top 80 percent of utilized prescription drugs. ESL calculated two fixed market baskets, one for brand-name prescription drugs (Brand Prescription Price Index) and one for generic prescription drugs (Generic Prescription Price Index), and set these at $100. ESL also set the Consumer Price Index at $100 for 2008. In 2009, ESL evaluated the value of each fixed market basket to determine whether the basket's value changed. This analysis was continued each year through 2016.

According to ESL's data, the Consumer Price Index increased 14.38 percent between January 1, 2008, and January 1, 2016. The Brand Prescription Price Index increased 207.86 percent. The Generic Prescription Price Index decreased 73.73 percent. Therefore, the data indicates that brand-name prescription drug prices increased and generic prescription drug prices decreased between 2008 and 2016. As of 2016, 85.4 percent of prescriptions for drugs were for generic drugs, according to ESL.

Path to the ballot

See also: Laws governing the initiative process in South Dakota

The state process

In South Dakota, the number of signatures required to qualify an initiated state statute for the ballot is equal to 5 percent of the votes cast for governor in the previous gubernatorial election. Signatures must be submitted by the first Tuesday of May during a general election year.

The requirements to get an initiated state statute certified for the 2018 ballot:

• Signatures: 13,871 valid signatures were required.
• Deadline: The deadline to submit signatures was November 6, 2017.

Once the signatures have been gathered and filed, the secretary of state verifies the signatures using a random sample method.

Details about this initiative

Drey Samuelson submitted an initiative proposal to the LRC on June 26, 2017, which then issued comments. On August 22, 2017, the attorney general produced a ballot title and summary for the initiative.

On November 6, 2017, supporters submitted over 22,000 signatures. At least 13,871, or about 63 percent, of those signatures needed to be valid in order for the measure to qualify for the 2018 ballot. On April 11, 2018, the secretary of state announced that enough signatures were found valid to qualify the measure for the ballot.

On July 16, 2018, a judge ordered the measure to be removed from the ballot.

Lawsuits

PhRMA v. Jackley

  

Lawsuit overview
Issue: Ballot language; whether the language complies with South Dakota Code 12-13-25.1 ("... objective, clear, and simple summary to educate the voters of the purpose and effect of the proposed initiative...").
Court: South Dakota Sixth Judicial Circuit and South Dakota Supreme Court
Ruling: Sixth Judicial Circuit Court ruled in favor of the defendant, allowing the attorney general's original ballot title and summary to remain. The plaintiffs appealed to state Supreme Court. In May 2018, the Supreme Court rejected the challenge and upheld Jackley's ballot title and summary.
Plaintiff(s): Joni Johnson, South Dakota Biotechnology Association, and Pharmaceutical Research and Manufacturers of America (PhRMA)	Defendant(s): Attorney General Marty Jackley
Plaintiff argument: The ballot summary needs to include information about a provision giving petitioners legal standing to defend the measure in court and about potential effects.	Defendant argument: The ballot summary is fair, clear, and simple.

  Source: Capital Journal

In 2017, South Dakota Biotech and Pharmaceutical Research and Manufacturers of America (PhRMA) filed litigation against Attorney General Marty Jackley (R) regarding the ballot title and summary he wrote for the initiative. The plaintiffs said the title and summary did not mention language in the initiative that would give petitioners legal standing to defend the measure in court. Attorney General Jackley said he "worked to provide a fair, clear, and simple summary." On September 12, 2017, Judge Mark Barnett of the South Dakota Sixth Judicial Circuit declined the plaintiffs' request to order a rewrite of the ballot title and summary.

Plaintiffs appealed to the South Dakota Supreme Court. In May 2018, the Supreme Court rejected the challenge and upheld Attorney General Jackley's ballot title and summary.

South Dakotans Against the Deceptive RX Ballot Issue v. Secretary of State Shantel Krebs

  

Lawsuit overview
Issue: Signature validity; whether petition circulators falsely swore their residence address or were not South Dakota residents, and whether circulators made errors in obtaining signatures rendering them in violation of South Dakota law
Court: South Dakota Sixth Judicial Circuit
Ruling: Ruled in favor of plaintiffs, the initiative was removed from the ballot on July 16, 2018
Plaintiff(s): Joni Johnson and South Dakotans Against the Deceptive Ballot RX Issue	Defendant(s): Secretary of State Shantel Krebs
Plaintiff argument: The circulators of the petition submitted 13,871 invalid signatures, petition circulators were not residents of South Dakota, which is in violation of state law	Defendant argument: Unknown

  Source: Dakota War College

On May 11, 2018, Joni Johnson and South Dakotans Against the Deceptive RX Ballot Issue filed litigation against South Dakota Secretary of State Shantel Krebs. The plaintiffs allege that circulators of the petition were not residents of South Dakota, rendering the 6,238 signatures submitted by them invalid. Plaintiffs also allege that petition circulators submitted 2,665 additional invalid signatures, for a total of 8,959 invalid signatures. Supporters submitted a total of 22,091 signatures, and 13,871 needed to be valid to qualify the initiative for the ballot. The plaintiffs allege that the proponents of the measure did not meet the valid signature requirement to qualify for the ballot. On May 18, 2018, Judge Patricia J. Devaney of the South Dakota Sixth Judicial Circuit ordered that the Secretary of State, defendant Shantel Krebs, is prohibited from placing the initiative on the ballot and that Krebs must appear at a hearing on August 1st, 2018 to show cause for why the initiative should be placed on the ballot.

On July 16, 2018, a judge ordered the measure to be removed from the ballot. In a statement, South Dakotans Against the Deceptive Rx Ballot Issue, wrote, “IM26 was about deception from the beginning. Proponents of this deceptive proposal took a bad idea rejected by voters in California and Ohio, funded it with contributions from an out-of-state health care organization and violated the law in attempting to qualify it for the ballot.”

Related measures

2018

Healthcare measures on the ballot in 2018
State	Measures
Nevada	Nevada Question 4: Medical Equipment Sales Tax Exemption Amendment a
Oregon	Oregon Measure 101: Healthcare Insurance Premiums Tax for Medicaid Referendum a
Idaho	Idaho Proposition 2: Medicaid Expansion Initiative
Massachusetts	Massachusetts Question 1, Nurse-Patient Assignment Limits Initiative d
Nebraska	Nebraska Initiative 427, Medicaid Expansion Initiative a
California	California Proposition 4: Children's Hospital Bonds Initiative a
Montana	Montana I-185, Extend Medicaid Expansion and Increase Tobacco Taxes Initiative d
California	California Proposition 8: Limits on Dialysis Clinics' Revenue and Required Refunds Initiative d

2017

Healthcare measures on the ballot in 2017
State	Measures
Ohio	Ohio Issue 2: Drug Price Standards Initiative d
Maine	Maine Question 2: Medicaid Expansion Initiative a

2016

,

Drug price measures on the ballot in 2016
State	Measures
Califronia	Proposition 61: Drug Price Standards

See also

2018 measures

• 2018 ballot measures
• Healthcare on the ballot

South Dakota

• South Dakota ballot measures
• South Dakota ballot measure laws

News and analysis

• Ballot measure lawsuits
• Ballot measure readability
• Ballot measure polls