Proposition 34 explained: What California’s prescription drug measure is asking you
Proposition 34 asks voters to approve new rules for certain nonprofit healthcare providers. It’s also part of an ongoing tussle between the Los Angeles-based AIDS Healthcare Foundation and its critics.
Certain healthcare nonprofits, including the AIDS Healthcare Foundation, participate in a federal program called 340B, which allows them to purchase prescription drugs at a discounted price. Providers are able to earn revenue from these discounted prescriptions.
The AHF has also funded three ballot measures since 2018 attempting to repeal limits on rent control in California, including this year’s Prop. 33. Critics accuse it of spending on political campaigns at the expense of its patients and low-income tenants in properties the organization owns.
Opponents of the controversial nonprofit drafted Prop. 34 to ensure AHF spends the bulk of its funding from a federal drug discount program on patient care, rather than ballot campaigns.
AHF is a main opponent of Prop. 34, arguing it’s an unfair target of the ballot measure and that increasing rent control is core to its mission.
What a ‘yes’ vote means
Voting yes on Prop. 34 is a vote in favor of stricter rules governing certain California nonprofits that participate in the federal 340B program, requiring them to spend at least 98% of their revenue from the program on direct patient care.
However it would only apply to a slice of providers that meet the following criteria:
Participates in the federal 340B program
Licensed or previously licensed to operate as a health plan or clinic in California
Spent more than $100 million on purposes other than direct patient care during any 10-year period
Owns and operates multifamily housing units that have received 500 or more high-severity violations
The nonpartisan Legislative Analyst’s Office says it’s likely the measure would apply to “few entities” in the state.
If an organization spends less than 98% of its drug discount revenue on patient care, it could face the following penalties:
Lose its California tax-exempt status
Lose its license
Banned from receiving government grants or contracts
Its leaders would be banned from serving in leadership roles in a California health plan, clinic or pharmacy
What a ‘no’ vote means
A no vote on Prop 34. is a vote to keep rules governing California-based participants in the federal drug discount program the same.
Supporters of Prop. 34
Backers of Prop. 34 include Assemblymember Evan Low, D-Campbell, and the ALS Foundation.
They argue in official ballot arguments the measure would stop “egregious financial abuse” of the federal drug discount program in California.
“When we have bad corporate actors that profit off public programs, the services our families rely upon take the hit, including schools, public safety, and emergency responders,” supporters wrote.
A ballot measure in support of the committee has so far raised more than $26 million, mostly paid by the California Apartment Association.
Other supporters include:
California Professional Firefighters
Latino Heritage Los Angeles
California Association of Realtors
Opponents of Prop. 34
Opponents call it a “revenge initiative” against the AIDS Healthcare Foundation for its continued quest to enact rent control in California. The AHF is primarily funding Prop. 33, the rent control measure on this year’s ballot.
The nonprofit and other critics write in official ballot arguments that Prop. 34 “seeks to weaponize the initiative process by allowing powerful interests to target a single organization to punish and shut them up.”
The opponents argue that nonprofits “are permitted by federal law to use these drug company discounts in accordance with their non-profit mission -advocating for rent control, women’s reproductive rights, and a healthy environment.”
Other opponents of the measure include:
Consumer Watchdog
National Organization for Women
Coalition for Economic Survival
The AIDS Healthcare Foundation has so far put about $1 million into fighting the measure, according to campaign finance records.
Fiscal impacts of Prop. 34
Prop. 34 would likely result in higher government costs due to increased oversight and enforcement of the rules. Those costs would be paid with fees by the organizations covered by the rules.
The Legislative Analyst’s Office notes many possible effects of the measure are unknown, including whether organizations change their operations, and impacts to state tax revenue and Medi-Cal spending if the new rules put a nonprofit out of business.
