March 31, 2016

The Honorable Kurt Daudt
Speaker
Minnesota House of Representatives
100 Rev. Dr. Martin Luther King Jr. Blvd.
Saint Paul, MN 55155

Dear Speaker Daudt,

Two DFL-sponsored bills have been introduced in the House of Representatives, HF 2525 and HF 2526, which would require pharmaceutical companies to provide an unprecedented amount of proprietary information on certain drugs. Both bills would severely weaken intellectual property rights and stifle the future innovation of life-saving biopharmaceuticals. On behalf of the more than 30,640 members and supporters of the Council for Citizens Against Government Waste in Minnesota, I respectfully ask that you persuade the House’s relevant committees not to consider these bills.

Sponsors claim the bills will reduce healthcare costs and help patients, but if fewer pioneering drugs that mitigate or cure diseases are brought to market, that will raise costs and ultimately hurt patients. The Minnesota State Senate is in the process of considering SF 2942, a companion bill to HF 2526.

HF 2526 would require a drug manufacturer that sells a prescription pharmaceutical in the state with a wholesale acquisition cost (WAC) of $1,000 or more per month, or per course of treatment, to produce a detailed report on the total costs associated with the production of the drug to the State Commissioner of Health. The report would include proprietary information, such as research and development costs; clinical trials and regulatory costs; materials, manufacturing, and administrative costs; acquisition costs, including patents and licensing; marketing and advertising costs; and a cumulative annual history of the average wholesale price and WAC increases, along with the total profit of the drug.

This is an unwarranted and unreasonable fishing expedition that will be used to establish price controls. Research and development outlays can already be found in annual reports and are also reported to the Securities and Exchange Commission. It is also difficult to quantify exactly what was spent to create a particular drug. Pharmaceutical companies spend tens of millions of dollars testing different compounds, many of which end up being discarded or shelved because they do not work or are unsafe. Researchers still need to be paid even if a compound they are working on never makes it to human clinical trials. Other compounds may be successful, but not for the originally intended indication. Moreover, some of the information requested under the bill is so sensitive that its exposure would kill innovation and stifle competition.

It is understandable that legislators and consumers are concerned about high drug prices, but an environment that fosters competition is the better approach to lowering drug prices than exposing proprietary information and utilizing price controls. This is why Congress is holding the Food and Drug Administration’s (FDA) feet to the fire to start reducing the backlog of more than 4,000 generic drug applications.

Under the current conditions, it takes between 10-12 years to get a new drug through the FDA approval process and it costs, on average $2.6 billion to do so. The U.S. House of Representatives has proposed new ways to modernize and speed-up clinical trials, such as utilizing biomarkers and real-world evidence, through the 21st Century Cures Act. This is a far more reasonable manner in which to help lower the costs of drugs and increase competition than the proposed bills in Minnesota.

States with strong intellectual property protections will encourage research-intensive businesses to establish themselves in those states and add to a strong economy. Government actions that weaken intellectual property rights and destroy innovation serves no one. Again, I ask that you discourage any hearings or consideration of these bills.

Sincerely,
Tom Schatz