CCAGW Urges Opposition to Pharmaceutical Price-Control Bills | Council For Citizens Against Government Waste

CCAGW Urges Opposition to Pharmaceutical Price-Control Bills

Letters to Officials

September 25, 2019

House of Representatives
U.S. Capitol
Washington, D.C. 20515

Dear Representative,

On behalf of the more than one million members and supporters of the Council for Citizens Against Government Waste (CCAGW), I urge you to oppose H.R. 3, The Lower Prescription Drug Costs Now Act, and other bills that would impose price controls over pharmaceuticals, including those that have been introduced by Republicans in both chambers.

H.R. 3, introduced by House Speaker Nancy Pelosi (D-Calif.) on September 19, 2019 is the worst of these proposals. Prices would be based on the cost of pharmaceuticals in six countries that have imposed price controls, which have diminished the research and development of biopharmaceuticals in those countries. The price would be applied to Medicare and to the commercial market. It inserts price controls into Medicare Part D by requiring manufacturers to provide 10 percent of the cost in the initial coverage phase and 30 percent in the catastrophic phase. H.R. 3 also includes an inflation rebate, or tax, that would be applied to Medicare Parts B and D, among other government interventions.

If a pharmaceutical company refuses to participate in any part of the process or does not come to an agreement with the Department of Health and Human Services (HHS), the government would impose an excise tax of up to 95 percent on annual gross sales of the drug under consideration. In other words, there is no negotiation, just a form of extortion, under H.R. 3.

Unfortunately, drug pricing bills and proposals introduced by Republicans and the Trump administration, as well as Republican-controlled state legislatures, also contain unwelcome and unnecessary provisions. The most prominent legislation being promoted as a “reasonable” alternative to the Pelosi plan is the Senate Finance Committee’s Prescription Drug Pricing Reduction Act (PDPRA). While CCAGW agrees that private sector negotiation within the various phases under Medicare Part D would lower costs for beneficiaries and the government, PDPRA goes in the wrong direction. It removes the current coverage gap (donut hole) phase and along with it the mandatory 70 percent discount for brand drug manufacturers, a significant price control, and re-engages the negotiation prowess of private drug plans for 75 percent of the costs from the deductible to the catastrophic phase, maintaining the beneficiary’s contribution of 25 percent while providing an out-of-pocket (OOP) limit of $3,100. The proposal inserts a new drug price control of a 20 percent discount at the catastrophic threshold for pharmaceutical companies, while drug plans pay 60 percent and Medicare pays 20 percent.

Pharmaceutical manufacturers are not insurers. There should not be a government-mandated price within any of Medicare Part D phases as it will distort the market. The liability should be on insurers or drug plans in the initial coverage and catastrophic phases, giving them as much flexibility as possible to design their plans in order to increase the incentives for manufacturers to negotiate so that patients can access the pharmaceuticals that they need. The plan that comes closest to this concept was released by the American Action Forum in August 2018, “Redesigning Medicare Part D to Realign Incentives.”

The Senate Finance Committee bill includes a myriad of mind-numbing big-government provisions such as inflationary rebates; enabling the government to pick winners and losers with various pricing incentives; complex transparency policies and interference that would harm the negotiations among pharmacy benefit managers, insurers, retail pharmacies, and prescription drug manufacturers that will do nothing to lower costs for patients; and contorted policy changes that will add further bureaucratic red tape to Medicare Part B, Medicare Part D, and Medicaid to control drug prices.

Fiscal conservatives either believe or do not believe that free markets lower healthcare costs. More government intervention in healthcare, like price controls for pharmaceuticals, adopting foreign drug pricing, increased taxes, and complicated bureaucratic regulations will drive up rather than reduce costs. They will also undermine and damage innovation and investment in the pharmaceutical industry.

I urge you to oppose these House and Senate drug pricing bills and instead support legislation that would promote increased free-market incentives to bring down costs in government drug programs and throughout the entire healthcare system.


Tom Schatz
President, CCAGW

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CC: U.S. Senate

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