Why drug companies, hospitals are spending big at state Capitol – and what it means for you

Drug companies, hospitals and dialysis companies spent millions of dollars in the first half of the year fighting bills that would have hurt their bottom lines, according to lobbying reports filed last week.

Hospitals successfully killed a bill to set out-of-network payment rates in an effort to eliminate surprise bills. Dialysis and pharmaceutical companies are still fighting measures that aim to crack down on steering dialysis patients to private insurance and delaying low-cost generic drugs.

All involved agree on what’s at stake: California drug prices, the cost of hospital care and the rules governing dialysis care.

The bills’ supporters, which include powerful labor groups that also spend millions on lobbying with an eye toward their members’ costs, say the proposals would lower health care bills. Opponents say proposed laws unfairly target the wrong parts of the health care industry and will ultimately harm patients.

“We hear all the time that the cost of health care is too high, and when we as a Legislature look at ways to intervene and try to contain costs, we run into huge push-back,” said Assemblyman Jim Wood, who authored the bills aimed at pharmaceutical and dialysis companies. “There’s huge money behind the opposition.”

For all three measures, there are powerful interests on both sides.

For example, the surprise ER billing proposal was opposed by the California Hospital Association, which spent more than $1.5 million lobbying in the first half of the year, making it the seventh-highest spender.

But the bill was supported by some of the most powerful labor unions in the state, including the California Teachers Association. Although AB 1611 wasn’t its top priority, CTA is the biggest lobbying spender at the California Capitol this year, dropping $4.3 million.

AB 1611 aimed to shield patients from “surprise” medical bills for care from doctors or hospitals outside their insurance network. That can happen if a person is rushed to an emergency room in a hospital that isn’t covered by their insurance.

AB 1611 would have limited the amount a patient would be charged in that situation and would have set the payment rate for out-of-network care based on the average contracted rate for similar care in the area.

Hospitals support eliminating surprise billing but oppose the way the bill determined how they would be paid for treating out-of-network patients, California Hospital Association spokeswoman Jan Emerson-Shea said.

“No one should be out of network when it comes to emergency care,” Emerson-Shea said. “You don’t have a choice as to where you’re taken. What’s important is that you get the care you need.”

But fighting the bill was the group’s “highest priority,” she said, because it wouldn’t have fairly compensated hospitals and would have discouraged health plans from negotiating fair payment rates.

Supporters shelved the bill last month but vowed to try again in the future.

“Due to the hospital industry’s opposition, California consumers will have to wait another year for protections against surprise medical bills when visiting an emergency room,” Anthony Wright, executive director of Health Access California, said in a statement announcing supporters’ decision to shelve the bill. “We will continue to fight for the strongest bill possible that protects Californians from being squeezed by high hospital bills and high premiums.”

The bill to crack down on so-called “pay for delay” tactics by drug makers also pitted powerful health groups against one another. The practice occurs when a pharmaceutical company pays another company to delay releasing a cheaper generic version of a drug for which the patents have expired.

“Pay for delay” can already be prosecuted under existing law banning companies from engaging in anti-competitive behavior, but California Attorney General Xavier Becerra said it’s extremely difficult to take up such a case.

“Trying to prove that a company is engaged in an anti-competitive act is really tough,” said Becerra, who is sponsoring the bill. “It’s really time consuming and really expensive, and that’s why very few cases are ever taken up.”

The bill, AB 824, would force drug companies to prove they aren’t engaging in anti-competitive behavior when they strike deals with companies that produce generic drugs. Becerra said that will give the state “a fighting chance in court” to crack down on the practice.

Pharmaceutical companies spent more than $2.3 million this year lobbying on AB 824 and other bills.

Priscilla VanderVeer, a spokeswoman for the trade association Pharmaceutical Research and Manufacturers of America, said AB 824 “places a presumption of guilt before any other facts are presented.”

The trade association argues that sometimes drug companies strike deals with generics manufacturers to let them sell generic versions of drugs before the patent expires, and AB 824 would interfere with that, VanderVeer said.

Powerful health industry groups including the California Medical Association, which represents doctors, health insurance companies Kaiser and Blue Shield and the California Association of Health Plans are backing the bill. They’ve spent more than $2.8 million this year lobbying on AB 824 and other bills.

Some powerful labor unions, including the California Teachers Association and the California Labor Federation, have backed the bill. Those unions have also spent millions on lobbying this year.

Dialysis companies DaVita and Fresenius have spent nearly $1 million on lobbying this year while opposing a bill that aims to prevent them from steering patients toward private insurance.

DaVita is responsible for the majority of that total, spending nearly $725,000 lobbying lawmakers in the first half of the year. That makes the company the 25th highest lobbying spender in the state.

Nearly all dialysis patients in the U.S. are eligible for government-funded health insurance under federal law. But the nonprofit American Kidney Fund, which is funded by the dialysis companies, has been accused of steering patients toward private insurance plans that have higher payment rates for the dialysis companies.

The nonprofit pays patients’ premiums, but having to cover high-cost dialysis patients causes insurance companies to raise rates for everyone, Wood said.

The bill would cap reimbursement rates for the dialysis companies in situations where a third-party like the American Kidney Fund is paying a patient’s premiums.

American Kidney Fund President LaVarne Burton denied any improper conduct when speaking against the bill in the Senate health committee last month. She said the organization helps thousands of people in California afford care for their kidney disease.

Some other health industry groups, including doctors, also oppose AB 290 because of the way it aims to set rates for dialysis care.

“We’ve always operated the American Kidney Fund with the highest ethical standards and efficiency,” Burton said. “Despite our great work and commitment to patients, our lawyers have determined we will be forced to shut down (in California) if AB 290 is enacted.”

DaVita and Fresenius argue the policy would reduce access to care, particularly for low-income patients, according to an analysis of the bill by the Senate Health Committee.

The companies have a history of spending big on California politics. Last year the companies mounted the most expensive ballot measure campaign on record in California to defeat a measure that would have capped their profits.

This story was originally published August 5, 2019 at 5:30 AM.