CCAGW Urges Opposition to H.R. 3, The Lower Cost Drugs Now Act of 2019 | Council For Citizens Against Government Waste

CCAGW Urges Opposition to H.R. 3, The Lower Cost Drugs Now Act of 2019

Letters to Officials

December 9, 2019

House of Representatives
Washington, D.C. 20515

Dear Representative,

You are scheduled to soon vote on H.R. 3, “The Lower Cost Drugs Now Act of 2019,” Speaker Nancy Pelosi’s (D-Calif.) price-control drug bill. This legislation, if it should ever become law, would exert an unprecedented amount of government authority over America’s robust and innovative biopharmaceutical industry. A December 3, 2019 Council of Economic Advisers’(CEA) assessment found that H.R. 3 could cause as many as 100 fewer drugs entering the U.S. market, or one-third of the total number expected in the next decade. On behalf of the more than 1 million members and supporters of the Council for Citizens Against Government Waste (CCAGW), I urge you to vote against H.R. 3.

The legislation states that during a “voluntary negotiation period,” the secretary of Health and Human Services would enter into agreements with drug companies over the price of a drug.  Up to 250 drugs that lack competition and have the greatest cost to Medicare, as well as the commercial market, would be identified as targets. The secretary would be required to negotiate the price of at least 35 drugs annually.

The maximum price that could be “negotiated” would be no higher than 120 percent of the average international market price of a drug found in six countries. These six countries have used price controls for drugs and as a result have severely damaged their biopharmaceutical research. If a company should refuse to accept the government’s maximum fair price, it would be hit with up to a 95 percent excise tax on the previous year’s annual gross sales of the drug in question. 

This is not negotiation, it is extortion.

The legislation’s use of price controls, including inflationary taxes, might lower drug prices in the short run, but in the long run would destroy American biopharmaceutical innovation and create shortages, as noted by the CEA. Few investors, including retirement account managers, would invest in biopharmaceutical companies knowing the heavy hand of government was in control. Investment dollars would go elsewhere, and it would not be long before the U.S. biopharmaceutical industry would be a shadow of itself.

Some members of Congress have called for some of the drug cost “savings” to be turned over to the National Institutes of Health (NIH), which focuses on basic research, not applied research. But there would be no savings once private investment dries up. In 2017, the U.S. pharmaceutical industry invested $97 billion in research and development, while NIH’s budget in that year was $32.6 billion. The additional $64 billion in research and development will simply disappear.

Price controls never work. President Nixon’s Wage and Price Controls were implemented in the 1970s to contain inflationary pressures and caused shortages for food and other common goods. They also distorted and disrupted gasoline supplies and were particularly harmful to domestic producers, leading to long lines at gas stations.

The U.S. already uses price controls in government-run programs, including Medicaid rebates; Medicare Part B; the 340B drug discount program; statutory pricing in the VA; and the mandatory 70 percent discount in Medicare Part D’s coverage gap. These price controls have distorted the pharmaceutical market.

Everyone agrees that some drug prices are high, but the best way to solve that problem is more competition. Congress should be focused on making sure the Food and Drug Administration (FDA) is implementing the policies found in the 21st Century Cures Act that allows the agency to use modern methods, like biomarkers; new approaches to designing clinical trials; up-to-date technologies; and the perspective of patients to speed up clinical trials and drug review. The FDA needs to accelerate generic drug approvals and utilize prescription drug user fees wisely and efficiently. The United States-Mexico-Canada Agreement, which lays the groundwork for other, better trade deals to protect U.S. biopharmaceutical intellectual property, must be signed into law. Future trade deals must make other countries contribute to, not free-ride on, the research paid for by American consumers and taxpayers.

America currently leads the world in biopharmaceutical research. This should be celebrated, not condemned. Enactment of H.R. 3 would not only fail to lower drug costs, it would smother the creation of innovative medicines that are tackling serious diseases like Alzheimer’s, Parkinson’s, cancer, and other chronic conditions.

H.R. 3 represents the worst of what government can do to a thriving industry that saves lives and it must be stopped from becoming law.

All votes on H.R. 3 will be among those considered for CCAGW's 2019 Congressional Ratings.

Sincerely,

Tom Schatz
President, CCAGW

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