Independent pharmacist Odette Leonelli owns a small pharmacy in Redondo Beach. Like many small businesses, the pharmacy has struggled in recent years due to economic hardship, but they have survived. The bigger threat to small pharmacies, according to Leonelli, is not the economy, but the abusive auditing practices of large pharmacy benefit managers (PBMs), the companies who control a large portion of the prescription drug industry in this country, including pricing and pharmacy reimbursement rates.

According to Leonelli’s opinion piece in the Redondo Beach Patch this week:

Small, independent pharmacies like mine have survived many economic downturns-including the Great Recession-and have adapted to technology and the changing needs of our customers. But we face a formidable foe in the large pharmacy benefit management companies (PBMs) that manage prescription drug benefits for more than 215 million Americans. PBMs manage prescription insurance claims, and pharmacies of all sizes must enter into contracts with them in order to serve patients.

Leonelli goes on to describe the frequently unfair PBM auditing process, which has a direct impact on the pharmacy business, particularly smaller, independent pharmacies. Leonelli argues that PBMs use this process to “bully” smaller pharmacies:

Right now, there are no uniform auditing standards, so pharmacies are subject to whatever “rules” a PBM sets up. Because the PBMs keep the money they recover from a denied claim, they have a strong financial incentive to deny every claim.

…

As a result of abusive audits, pharmacies are required to spend excessive amounts of time documenting each pharmacy claim and surviving the audits.  This is time that would be much better spent on patient counseling and care.

So, for relief, we are asking our state legislators to support state Sen. Curren Price’s bill to establish fair standards for pharmacy audits and prevent claims from being denied based on minor technicalities. SB1195 maintains the right of a PBM to audit the claims of pharmacies to identify fraud and invalid prescriptions, but takes away the incentive for the PBMs to deny as many claims as possible. It brings fairness to the audit process.

This legislation is pro-small business, pro-patient, and will not cost taxpayers a dime. It deserves the full support of the Legislature.

To learn more about how PBM’s are hurting California’s independent pharmacies, and find out what you can do to help, please visit Pharmacy Choice and Access Now.  

SACRAMENTO, CA – Consumer Watchdog today called on state and local governments to quit spending taxpayer millions on Scott toilet paper, Kleenex tissues and other products from Kimberly-Clark Corporation. The global company is part of a corporate coalition battling to keep a tax loophole that benefits only out-of-state corporations—to the detriment of California schools, local governments and state services.

In letters to Gov. Jerry Brown and the mayors and executives of 21 cities and some large counties, Consumer Watchdog also urged governments to avoid Chrysler and GM auto and truck purchases. The automakers are also in the coalition of out-of-state corporations eager to evade corporate taxes in California.

The letter to Gov. Brown said in part:

“Every dollar of taxes evaded by large corporations is another dollar taken from our schools, fire and police protection and support for the impoverished and disabled.  We ask you to set an example by avoiding taxpayer-funded purchases from out-of-state companies lobbying to protect a state loophole that lets them pay less than in-state companies.

“A ripe target is toilet paper and other janitorial products made by Kimberly-Clark, whose brands include Scott paper products and Kleenex. The global company is part of a corporate coalition battling against efforts to use the same corporate tax formula for all companies that sell products in California, as almost all other major states do. California’s “take-your-pick” loophole costs the state up to billions of dollars a year. Constituents would both smile and applaud your vow to “Flush Tax-Evader Toilet Paper.”

“We also ask you to avoid taxpayer purchases of Chrysler and GM autos and trucks for public safety and other state uses, as well as cardboard products from International Paper Co. They are in the coalition with Kimberly-Clark formed specifically to lobby against a legislative proposal and likely ballot initiative that would close the tax loophole.

(Click here to see the letter to Gov. Brown. The letters to localities are similarly phrased.)

A Consumer Watchdog analysis of California purchases through a state purchasing coalition in the current fiscal year shows that Kimberly-Clark products account for 20% to 25% of total “janitorial supply” orders, and over $1.6 million of taxpayer spending in a year. Only some counties, cities and state agencies use the purchasing contract, so the statewide total would be several times larger than  $1.6 million. However, the proportion of purchases is likely to be similar statewide, said Consumer Watchdog.

“We want local and state government to flush tax-evader toilet paper,” said Judy Dugan, research director for Consumer Watchdog. “State universities, local police departments and other agencies that buy Kimberly-Clark products are also buying themselves deeper cuts in essential services. There are plenty of better choices on the market.”

The Consumer Watchdog analysis looked at Department of General Services order lists for janitorial supplies during two quarters of 2011. On an annual basis, orders for Kimberly-Clark products would total more than $1.6 million. (see Excel charts for Q1 and Q3 of the 2011-12 fiscal year linked below.) Independent purchases by many cities and counties would likely at least triple the amount. For instance, Los Angeles, San Diego, San Francisco and Sacramento do not list any purchases through the state contract.

Kimberly-Clark sells 122 products to state and local governments through the janitorial supply company Waxie, which has a multi-state contract for cleaning and janitorial supplies under the Western States Contracting Alliance. Purchases included several counties, small cities, state universities, transit and police agencies.

Kimberly-Clark is one of four global corporations in the deceptively named “California Employers Against Higher Taxes” coalition. The group was formed to fight elimination of an “alternative” corporate tax calculation that benefits out-of-state companies. The loophole costs California up to billions of dollars a year at a time when schools, protective services and aid to the disabled are being slashed.

Two other members of the pro-loophole group, Chrysler and General Motors, recently lost out on a large state contract for nearly 2,000 police cruisers and utility vehicles, for the California Highway Patrol and other agencies. The contract, worth close to $50 million over two years, went to Ford, which is not part of the pro-loophole coalition.

Click here to see Consumer Watchdog’s news release on the police cruiser contract.

“The state’s large contract for Ford vehicles sets a good precedent for putting taxpayer money in the right hands-a major automaker willing to pay its fair share of California taxes,” said Dugan.

The fourth member of the coalition is International Paper, which makes cardboard products including the boxes in which California produce is shipped. Its products, usually unbranded and sold through middlemen, are hard to track. A fifth member, Proctor and Gamble, dropped out of the coalition following public protests against its products.

Click here to see Consumer Watchdog’s analysis of federal tax evasion by members of the  pro-loophole coalition.

The two efforts to close the loophole are legislation by Assembly leader John Perez (AB1500) and a ballot initiative sponsored by tech multimillionaire Thomas Steyer, who fought successfully in 2010 against Proposition 23, which would have benefited oil companies. The proposals would shift California to the corporate tax system used in other major states–a single tax calculation that is primarily dependent on the amount of sales a company made in California.

Consumer Watchdog, a nonprofit, nonpartisan consumer advocacy group, does not support any particular proposal to fix the loophole as long as it stops the gaming of the state tax code.

Here are links to quarterly lists in xlsx format of janitorial purchases through state purchasing contracts.

Q1, 2011-2012

Q3

Cities and counties to which letters are being faxed include: Los Angeles, Long Beach, Los Angeles County, San Diego, San Diego County, San Francisco, San Jose, Irvine, Santa Ana, Anaheim, Orange County, Sacramento, Riverside, Fresno, Oakland, Bakersfield, Stockton, Fremont, San Bernardino, Modesto, Oxnard, Fontana, Chula Vista and Santa Monica.

On the heels of San Diego and San Jose’s vote against public employee pensions comes this article: California’s Bad Bet Makes JPMorgan’s Look Minor  

The key points were all aimed at a deal struck in 1999, at the height of the dot-com boom when California was flush with cash and Gray Davis was probably on the VP short-list.

Promising that “no increase over current employer contributions is needed for these benefit improvements,” and that the state pension fund

would “remain fully funded,” the proposal, known as SB 400, claimed that enhanced pensions wouldn’t cost taxpayers “a dime” because of

healthy investment returns. The proposal went on to assert that it “fully expects” the state’s pension costs to remain below $766 million a

year for “at least the next decade.”

The Legislature included cost projections provided by the California Public Employees’ Retirement System — or Calpers — in the description

of the bill and passed it with broad bipartisan support. Governor Gray Davis signed it.

Since then, the pension system has earned only 75 percent of what it had hoped.

Because the state is unconditionally on the hook, the state

budget has had to make up the difference. As a result, the state has spent $27 billion on pensions, $20 billion more than Calpers projected.

Because the boosted promises last for decades — for employees’ lifetimes — and because the pension fund amortizes the difference between

what it expected to earn and what it really earned during such a long period, just a small portion of the increased costs has so far been

recognized. Far larger increases are in store.

To finance the $20 billion of extra cost for pensions, the state has cut spending on services and raised taxes. As one example, spending on

the University of California and California State University systems declined 18 percent from 2002 to 2012, while state spending on pensions

rose 214 percent.

On top of the results in San Diego and San Jose and with a tax proposition coming in November look to hear more about the impact of SB400.

Anti-tax groups get ready for big push in November

by Brian Leubitz

While President Obama won’t be spending a lot of time here in October, you can bet there will be a lot of money spent here.  With the Special Exemptions Act, the death penalty, several contested Congressional seats and the Governor’s revenue measure on the ballot, it will be a busy campaign season. But for Howard Jarvis’ corpse, it will be the same ol’ same ol. It’s what they do every day, slam the goverment, tell them how  terrible it is and bam, there you go.

There, at a news conference to announce the formation of “Californians for Reforms and Jobs, not Taxes,” Jon Coupal, president of the Howard Jarvis Taxpayers Association, previewed the campaign against the governor’s November ballot initiative to raise taxes. It will rely on messages, he said, that “quite frankly, are short and sweet.”

Brown’s opponents, Coupal said, will remind Californians of the state’s relatively high tax burden, challenge the Democratic governor’s claim that his tax increase is for schools and publicize unflattering examples of government spending.(SacBee)

Of course, take any large organization and you can find some dumb stuff going on. And, the California government is such and organization. But, just because there is a small stupid thing going on, doesn’t mean that we should just toss the big, smart things that go on every day. Like, you know, educating our children, maintaining our streets, and so on. California government is simply too big to fail.

Yet, that is where we are headed. With the continued pessimism and me-first attitudes of the anti-tax organizations, we are stuck on a 20th century budget in a 21st century reality. We have neither the flexibility nor the wherewithal to continue with budget disaster after budget disaster. And, yeah, the current budget is a mess.

The governor’s measure doesn’t fix that, and doesn’t totally save the budget, but it is a step that we must take.

At the University of California’s request, the Governor’s budget proposes to:

1. Shift $2.5 billion of existing state-supported debt onto the University of California’s books for capital projects paid for through State Lease Revenue Bonds.

2. Let UC take on more debt without legislative oversight in the future.

UC management’s proposal would kill essential state oversight of borrowing and take unnecessary risks that would leave taxpayers and students on the hook.  By rolling $2.5 billion of existing state-supported debt into UC’s budget, UC’s Wall Street management executives claim they could use the University’s superior credit rating to refinance the debt and save money this year.  In fact, UC’s credit rating is only a notch higher than the State of California’s.

Under this proposal, UC would be allowed without Legislative approval or even notification, to use General Fund dollars for any capital projects, not just to pay debt on the restructured bonds.

That hotel UC is pushing for at UCLA? Paid for with your tax dollars!

An additional financial burden of $2.5 billion in outstanding debt would put a squeeze on UC’s budget at a time when programs and jobs are being cut. It would also allow UC to take on even more debt without Legislative oversight. Transferring repayment of state-supported debt currently paid by the State to UC would not shield UC from future market volatility. Higher interest rates could increase debt service costs and divert already limited funds away from normal operating costs and core academic programs.

Runaway Debt Creates Pressure On Budget

Greater debt, future market volatility, and rising interest rates could create pressure on a limited pot of money. Higher education debt service costs in CA have already doubled in a decade, from $516 million in 2000 to $1.1 billion in 2010. Without adequate Legislative oversight, UC would be at risk for runaway debt.

If this is so bad for California’s taxpayers why is this still on the table?

This is a good question for Governor Brown and his staff. His office is the only current entity pushing this privatization bill. Anyone with any policy sense who reads the proposal sees immediate red flags. Anyone who remembers the Enron scandal or who has suffered at the hands of Wall Street over Main Street can see that this is a bad idea for all of California’s taxpayers.

Call the Governor and tell him no to UC’s debt privatization 916-445-2841 Tweet him at @JerryBrownGov #CABudget