Your guide to Proposition 34: Effort to limit major healthcare group’s non-patient spending

Proposition 34 would limit how certain healthcare providers spend revenues from a federal prescription drug program. The measure is an effort by the real estate industry to limit spending by the L.A.-based AIDS Healthcare Foundation, which has bankrolled several rent control initiatives, including one on the 2024 ballot.

The measure applies to healthcare providers who have spent over $100 million in any 10-year period on things besides direct patient care and have run multifamily housing with more than 500 “high-severity health and safety violations.”

If a healthcare provider meets that standard they would be required to spend 98% of their revenues from a federal prescription drug program on direct patient care.

The measure also permanently allows the state to negotiate Medi-Cal drug prices on a statewide basis.

The measure is sponsored by the California Apartment Assn., which has tangled with the AIDS Healthcare Foundation for years over its efforts to enable stricter rent control laws through ballot initiatives.

Proposition 34’s language does not name the AIDS Healthcare Foundation and the measure’s backers say it could apply to other healthcare groups as well. But no other health organization has such a well-publicized history of spending money on things other than direct patient care, operating housing with health and safety complaints and forcing the real estate industry to spend hundreds of millions of dollars to beat back rent control.

The AIDS Healthcare Foundation, commonly referred to as AHF, takes in about $2 billion a year in revenue. Most of that comes from a federal discount drug program called 340B that requires drug makers to sell their drugs at discounts to certain healthcare providers, who then turn around and charge health insurance companies more for the drugs.

According to California’s nonpartisan Legislative Analyst’s Office, the program is supposed to enable providers like AHF to serve more low-income patients, but federal and state law “does not directly restrict how providers spend their revenue from federal drug discounts.”

In recent years, AHF has drawn criticism that its foray into housing strays from its mission of helping those living with HIV or AIDS.

In recent years, the healthcare foundation has spent more than $300 million to fund rent control initiatives and buy apartment buildings across the country, including in and around Skid Row, saying housing is a public health issue, including for those with HIV or AIDs.

The foundation says it’s taken nearly 1,000 people off the streets and put them into permanent housing at its Skid Row-area properties, but those buildings have also been beset with heating, plumbing, elevator and electricity failures and vermin infestations, The Times found in an investigation published last fall.

Other supporters of Proposition 34 include health organizations such as the ALS Assn. and the California Chronic Care Coalition.

The AIDS Healthcare Foundation, as well as outside groups like Consumer Watchdog and the National Organization for Women.

The California Apartment Assn. says the measure will increase spending on patient care and, by permanently allowing the state to negotiate Medi-Cal drug prices, will lock in “billions of dollars in state savings every year” and thus lessen the rationale for taxes on its members.

Much of the recent advertising in favor of Proposition 34 hasn’t named AIDS Healthcare Foundation or its President Michael Weinstein specifically, but the apartment association has previously singled them out as a target.

Last year, a California Apartment Assn. communications director wrote on the trade group’s website that Proposition 34 was “aimed at preventing Weinstein from misusing taxpayer dollars on future rent control campaigns or other political ventures unrelated to the core mission of the AHF.”

The real estate group’s Protect Patients Now campaign committee also singled out Weinstein and AHF, when it listed them as the only named targets on the front page of its website.

The post on the apartment association’s website has since been removed, as have the AHF and Weinstein references on the campaign committee’s website, but they both remain visible in internet archives.

Nathan Click, a spokesman for Protect Patients Now, declined to answer questions about why the websites were changed, but said in an email that “while AHF and Weinstein are undoubtedly the most notorious abusers of the public dollars that flow from the program, they are by no means the only ones.”

The AIDS Healthcare Foundation has accused Protect Patients Now of “lying to voters and taxpayers about how AHF makes its money” and has called the measure anti-tenant and anti-patient.

AIDS Healthcare argues the measure is unconstitutional because the proposition singles it out for punishment, which supporters argue is false because, in theory, other organizations could qualify.

AHF sued to remove Proposition 34 from the ballot but was unsuccessful.

Mary-Beth Moylan, a law professor at University of the Pacific, said courts generally are reluctant to remove measures before an election, but judges may look more favorably upon AHF’s claims if Proposition 34 passes and the organization challenges it, as it has vowed to do.

“I think there is a good chance a court would find this unfairly punishes and targets a particular organization and person and that is really not allowable,” Moylan said.

If the measure passes and the courts uphold it, Moylan said, “it would be really unfortunate in terms of precedent setting.”

“It would encourage other groups to do these kind of retaliatory initiatives,” she said.

The California Apartment Assn. has contributed nearly all of the supporting funds. The opposition is funded by the AIDS Healthcare Foundation.