Oppose Colorado House Bill 1102 | Council For Citizens Against Government Waste

Oppose Colorado House Bill 1102

Letters to Officials

March 7, 2016

House of Representatives Health, Insurance, and Environment Committee
Colorado General Assembly
Denver, Colorado  80203  

Dear Representative, 

You will soon consider House Bill 1102, a bill that would require drug manufacturers to report production costs for certain high-cost prescription drugs.  This bill would weaken intellectual property rights and stifle innovation, which will ultimately hurt patients.  On behalf of the more than 30,300 members and supporters of the Council for Citizens Against Government Waste in Colorado, I ask that you reject this ill-advised legislation in committee and not allow it to reach the floor.  

The bill would require a drug manufacturer that sells a prescription pharmaceutical in the state with a wholesale acquisition cost of $50,000 or more to produce a detailed report on production costs to the Colorado Commission on Affordable Health Care.  The data would include proprietary information, such as research and development costs; clinical trials and regulatory costs; material, manufacturing, and administrative costs; charges paid by another entity; acquisition costs, including patents and licensing; marketing and advertising costs; a history of wholesale acquisition costs; and profits attributed to the drug. 

This is an unwarranted and unnecessary fishing expedition that will lead to price controls.  For example, research and development outlays can be found in annual reports and are also reported to the Securities and Exchange Commission.  Some of the information requested under this bill is so sensitive that its exposure would kill innovation and hurt competition. That will drive up prices, not lower them.  
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.
    
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 prices than exposing proprietary information and utilizing price controls.  That is why Congress is holding the Food and Drug Administration’s (FDA) feet to the fire to reduce the backlog of more than 4,000 generic drug applications.  

Currently it takes 10 to 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 H.B. 1102.  

States with strong intellectual property protections will have strong economies.  Government actions that weaken intellectual property rights destroy innovation and serve no one.  Again, I ask you to vote against this misguided legislation.  

Sincerely,  
Thomas Schatz

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