Proposition 34 would limit how certain healthcare organizations spend the money they make from a federal discount drug program. But at its core, the initiative pits the state's rental housing industry against the L.A.-based AIDS Healthcare Foundation, which has a history of backing rent control initiatives, including one on the Nov. 5 ballot. It has been dubbed by opponents as a "revenge initiative." (Much more on this all below.)

Prop. 34 would make certain health organizations spend 98% of their net revenue from the federal discount drug program on “direct patient care.” That program, known as 340B, has allowed healthcare organizations who serve vulnerable and low-income patients to buy drugs at a discounted price and then sell at a market rate. The intent is they can use the profit to serve more patients in need.

What does all of this have to do with rent control? Keep reading.

Official title on the ballot: Proposition 34 — Restricts Spending of Prescription Drug Revenues by Certain Health Care Providers. Initiative Statute

Understanding Prop. 34

The restrictions wouldn’t apply to all healthcare entities.

The healthcare organization would need to have spent more than $100 million on things other than direct patient care in the last decade — and own and operate multifamily housing units “with at least 500 high-level violations.”

So far, only one group appears to match that description: The AIDS Healthcare Foundation, which operates HIV clinics and thrift stores across the country.

The proposition would also codify the way the state buys drugs by having state agencies negotiate as a single entity for better prices.

The history behind it

So why is such a highly-targeted proposition even on the ballot? It comes down to this:

The AIDS Healthcare Foundation has funded a number of ballot measures on rent control in recent years (including Prop. 33 this year). They backed similar efforts in 2018 and 2020 that failed. The nonprofit’s founder and president, Michael Weinstein, has been a controversial political figure who’s built the organization into a $2 billion operation. The organization also provides housing and has been subject of an L.A. Times investigation about its properties’ poor living conditions.

Housing interest groups have opposed the AHF rent control ballot measures, and are now the main financial backers of Prop. 34.

How it would work

The proposition would create new rules for how a healthcare entity that participates in the 340B program can spend its revenues. If they spend less than 98% of their net revenue from the program on “direct” patient care, the organizations would essentially lose their ability to operate. Specifically, the organization would lose its license and its nonprofit status, would be barred from state and local government contracts or grants, and its leaders would not be able to serve in leadership roles in a California health plan, pharmacy, or clinic.

Cram session

During AirTalk's Ballot Cram Session live event, Larry Mantle talked with Caltech's Michael Alvarez, Pomona College's Sara Sadhwani and Claremont McKenna College's Zachary Courser about Proposition 34.

What people who support it say

Supporters say the measure is about accountability on revenue made off of a federal drug discount program. “That money should not be used for political purposes. It shouldn't be used for anything other than healthcare services,” said Nathan Click, spokesperson for Yes On Prop 34, which is sponsored by the California Apartment Association, and includes groups like the ALS Association and San Francisco Women’s Cancer Network. They’ve called Weinstein a “safety net scammer” and say the measure would put guardrails on the way revenue from the 340B program is spent and prevent future abuses.

What people who oppose it say

Opponents call this measure a “revenge initiative” targeted at the AIDS Healthcare Foundation’s efforts on rent control measures. “This is just clearly these corporate billionaire landlords putting an initiative on the ballot to stop a nonprofit that works on behalf of tenants, that works in advocacy for tenants, and is trying to expand rent control,” said Susie Shannon, policy director for Housing as a Human Right. They say their lobbying efforts are important to serving their patients because housing stability helps people stay healthy and prevents the spread of HIV. Opponents include Consumer Watchdog, and the National Organization for Women, who said the measure could have a ripple effect on nonprofit advocacy.

Potential financial impact

According to the California Legislative Analyst’s Office, “because few entities would be affected, the proposition’s statewide fiscal effect … would be limited.” It would increase state enforcement costs, but that would be paid by new fees on the affected entities.

Listen in as AirTalk tackles Prop. 34

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