What Is Prop. 34? Inside The Drug Revenue Spending Measure

CALIFORNIA — In 1992, the federal government allowed healthcare providers to get a discount on pharmaceuticals if they serve low-income and at-risk patients. The providers are then able to sell those drugs at retail rates, resulting in a tidy profit.

Theoretically, providers are supposed to use those profits to expand healthcare services to disadvantaged groups. However, the Los Angeles-based AIDS Healthcare Foundation has spent millions of dollars in profits on a number of campaigns related to housing and urban development.

The foundation bankrolled two unsuccessful statewide rent control ballot initiatives, and sponsored Proposition 33 on this year’s ballot, which would allow California cities to impose rent control laws they deem necessary.

It has also campaigned against legislation requiring local governments to permit denser housing, and backed a 2017 partial moratorium on new high-rise development in Los Angeles.

This had provoked the ire of the California Apartment Association and other real estate interests, and they organized and bankrolled a proposition that appears to narrowly target the AIDS Healthcare Foundation.

Proposition 34, also known as “Protect Patients Now,” requires certain California providers to direct at least 98 percent of drug profits on “direct patient care.” This new rule would apply to organizations that have spent at least $100 million on expenses other than direct care over 10 years and have operated multifamily housing with more than 500 “high-severity” health and safety violations. Eligible providers who don’t comply could risk losing their license, tax-exempt status, and government contracts.

Proposition 34 would also permanently allow the state to negotiate Medi-Cal drug prices.

The AIDS Healthcare Foundation has spent more than $300 million funding various rent control and anti-development initiatives, according to The Los Angeles Times. It has also bought a number of apartments in LA’s Skid Row, which have faced numerous problems with heating, plumbing, vermin, and more, according to a Times investigation from November 2023.

Proposition 34 supporters include the California Apartment Association, which represents the rental housing industry, the ALS Association, Assemblymember Evan Low, a Democrat representing the 26th Assembly District in Silicon Valley; the Republican Party of California, and the San Francisco Women’s Cancer Network. Proponents have raised an impressive $22.1 million, according to CalMatters, though the overwhelming majority comes from a $21.8 million donation by the California Apartment Association Issues Committee.

“The Protect Patients Now Act will force the worst abusers of the drug discount program, like Weinstein’s [AIDS Healthcare Foundation], back to the program’s original mission to provide healthcare to low-income patients,” supporters said in a statement. “This measure focuses only on the program’s worst offenders, putting in place new accountability measures to ensure they are appropriately using taxpayer dollars.

"The Act requires the program’s worst offenders like AHF and any others like it to spend 98 percent of their taxpayer-generated revenues on direct patient care. It also prevents them from overcharging government agencies for prescription drugs. So long as these worst offenders meet these requirements, they can continue their health care operations.”

Naturally, first among the proposition’s opponents is the AIDS Healthcare Foundation, which sued unsuccessfully to keep the proposition off the ballot. Although the foundation has spent hundreds of millions over the years on its various campaigns, it has only donated $426,000 to fight Prop. 34, which makes up most of the $536,000 opponents have raised. AHF’s advocacy organization, Housing is a Human Right, and California consumer protection agency Consumer Watchdog also have come out against the proposition.

“The anti-renter California Apartment Association is peddling a deceptive, unconstitutional ballot measure cleverly disguised as a patient protection bill but is, in fact, designed to hurt both patients and low-income renters. It’s a wolf in sheep’s clothing,” said Susie Shannon, policy director of Housing is a Human Right. “Don’t be fooled: The Patient Protection Act targets one organization, AHF, the largest HIV/ AIDS organization in the world, and the leading organization working to expand rent control for the most vulnerable in our society – low-income seniors, veterans, single parents and patients with HIV/AIDS.

“CAA, which does not represent patients, has shown they are willing to deceive voters in their quest for unbridled profits for the billionaire landlord class they represent, while patients and low-income renters suffer.”

According to a recent poll from the Public Policy Institute of California, 47% of voters support Prop. 34.