San Francisco Chronicle - Friday, October 1, 2004
Mark Martin, Chronicle Sacramento Bureau

Siding with the drug industry in a political debate occurring across the country, Schwarzenegger killed bills that would have created state-run Web sites directing people to Canadian pharmacies. He also vetoed bills that would have allowed state agencies to buy Canadian drugs for programs such as the state's health insurance plan for the poor and assistance for people with AIDS.

Schwarzenegger noted in his veto message that importing foreign drugs was illegal under federal law. He also touted a plan he unveiled last month calling on pharmaceutical companies to voluntarily reduce prices for uninsured Californians.

The governor acknowledged, however, that many companies had been so far unwilling to negotiate with his administration, and he vowed to work with lawmakers next year to force a reduction in drug prices if the industry doesn't cooperate.

It was a sign that high drug costs are likely to remain a hot topic in Sacramento.

Coming on the last day Schwarzenegger had to act on legislation for the year, the vetoes were criticized by Democrats and consumer groups who said Schwarzenegger had missed an opportunity to help Californians struggling to pay for prescriptions. Assembly Speaker Fabian Nu±ez, D-Los Angeles, called Schwarzenegger's alternative plan a "political placebo."

With the cost of many prescription drugs doubling in the last eight years in the United States and prices in Canada often 40 to 60 percent less, Democrats offered the bills as a way to save consumers big bucks. Because of government-imposed price controls, a three-month supply of Lipitor, a common drug for people with high cholesterol, costs about $100 less in Canada compared to the United States, for example.

The two bills that would have set up Web sites, AB1957 by Assemblyman Dario Frommer, D-Los Feliz, and SB1149 by Sen. Deborah Ortiz, D-Sacramento, were modeled on programs set up in six other states. Democrats noted that the Republican governor in Minnesota had approved legislation creating a Web site there.

The city of San Francisco also provides a link from its Web site, www.ci.sf.ca.us, to Canadian pharmacies.

Two other bills, SB1144 by Senate President Pro Tem John Burton, D-San Francisco, and SB1333 by Sen. Don Perata, D-Oakland, would have allowed state government to shop for drugs in Canada. Burton estimated the state could save $23 million annually if it bought only five commonly used drugs in Canada.

Drug companies mounted an intense lobbying campaign in Sacramento against the measures. They argue that drugs are more expensive in the United States because part of the costs go toward researching and developing new drugs, the kind of research that isn't done elsewhere. They also questioned whether drugs obtained from Canada would be as safe as those approved by the U.S. Food and Drug Administration, and they noted that simply directing consumers to Canada was an indirect way to handle drug costs.

"We applaud the governor's willingness to put cures before politics and veto this package of misguided policy proposals that would have allowed for the illegal importation of prescription drugs at the expense of California's economic growth, investment in drug research and development and patient safety," said Dr. Stephen Chang, head of a lobbying group formed to fight the bills.

In a press conference announcing the veto, Schwarzenegger's top health official, Kimberly Belshe, noted that the governor was committed to lowering drug prices and emphasized the governor's alternative program, dubbed "California RX." The program would allow uninsured Californians access to cheaper drugs offered through discounts provided by companies.

Belshe, the secretary of health and human services, said the administration was negotiating with "a number of companies" right now in hopes they would agree to provide the discounts. If agreements aren't reached in the next weeks, she said, the governor is willing to work with lawmakers next year on alternative proposals to lower prices.

The negotiations could open a political can of worms for the governor, however.

Schwarzenegger has received more than $337,000 from pharmaceutical companies since beginning his run for office last year. The governor has said he won't take money from industries he is dealing with on policy; earlier this summer, he said he would stop accepting contributions from energy companies while he dealt with a major Democratic proposal on electricity markets, for instance, and he has not taken any money from Indian tribes that operate casinos.

The Foundation for Taxpayer and Consumer Rights called on Schwarzenegger to give back the pharmaceutical industry money.

Martin Wilson, Schwarzenegger's political adviser, said there had been no talks yet between the governor's office and him about freezing drug company contributions.

"But it sounds like it's a discussion we need to have," he said.

E-mail Mark Martin at markmartin@sfchronicle.com.
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