CCAGW Thanks Chairman Grassley for Opposing Foreign Price-Controlled Drugs | Council For Citizens Against Government Waste

CCAGW Thanks Chairman Grassley for Opposing Foreign Price-Controlled Drugs

June 28, 2019

The Honorable Chuck Grassley
Chairman
Senate Finance Committee
219 Dirksen Senate Office Building
Washington, D.C.  20510

Dear Senator Grassley,

On behalf of the more than 1 million members and supporters of Council for Citizens Against Government Waste (CCAGW), I am writing to thank you for opposing the Trump administration’s proposed International Pricing Index (IPI) model, an ill-advised regulatory effort that would base Medicare Part B pricing on foreign price-controlled drugs.  CCAGW agrees with your statement, “I don’t think that this administration's approach on international pricing is going to be to the benefit of the adoption of and research for modern drugs.”

In his October 25, 2018 announcement on the new policy, President Trump said the administration was “taking aim at the global freeloading that forces American consumers to subsidize lower prices in foreign countries through higher prices in our country” and that “Americans pay more so that other countries can pay less.”  While he said the IPI would “fix” this problem, the proposal adopts the very same price controls that keep biopharmaceutical drug costs artificially low in foreign countries.  These countries utilize socialized healthcare and employ price controls and rationing to keep costs down.  As a result, their biopharmaceutical development is miniscule compared to the U.S.  It remains a mystery to CCAGW how the economics of this proposal would encourage foreign countries to pay their fair share of taxpayer and patient-funded U.S. research and development.

CCAGW agrees that Medicare Part B needs reform and would prefer a market-based approach similar to Medicare Part D.  However, CCAGW is concerned that in recent years Medicare Part D has drifted away from private negotiation.  Under the Patient Protection and Affordable Care Act (ACA), or Obamacare, researched-based pharmaceutical companies were forced to provide a 50 percent rebate in the donut hole, which is a price control.  The FY 2018 Bipartisan Budget Act made it worse by increasing the rebate to 70 percent.  As you know, price controls distort markets and too often hurt the very people that are supposed to benefit from these policies.  CCAGW will be interested in learning more about your proposal to reform Medicare Part D.

With respect to foreign countries utilizing price controls to keep drug costs down, the President’s Council of Economic Advisers stated in its February 2018 report, “Reforming Biopharmaceutical Pricing at Home and Abroad,” the root of this problem is that “foreign, developed nations, that can afford to pay for novel drugs, free-ride by setting drug prices at unfairly low levels, leaving American patients to pay for the innovation that foreign patients enjoy.”

CCAGW believes improved trade deals with strong intellectual property protection would help give pharmaceutical companies the leverage they need to protect themselves from compulsory licensing.  This would be a better approach to addressing the free-riding issue than adopting foreign price controls.

Sincerely,

Tom Schatz
President, CCAGW

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