March 9, 2016

The Honorable Carl E. Heastie, Speaker
New York State Assembly
Albany, NY 12248

The Honorable John J. Flanagan, Temporary President and Majority Leader
New York State Senate
Albany, NY 12247 

The Honorable Jeffrey D. Klein, Senate Coalition Leader
New York State Senate
Albany, NY 12247 

Dear Speaker Heastie, Majority Leader Flanagan, and Leader Klein,

Governor Cuomo’s Fiscal YR 2016-2017 Executive Budget includes a provision that directs the Department of Health to develop a list of certain “critical” drugs, establish price controls for them, and require drug manufacturers to provide an unprecedented amount of proprietary information that would severely weaken intellectual property rights and stifle innovation.  These actions will ultimately hurt, not help, patients.  Furthermore, the proposal would run counter to the state’s multi-million dollar marketing campaign that the state is “open to innovation” and job growth.  On behalf of the more than 78,300 members and supporters of the Council for Citizens Against Government Waste in New York, I ask that you reject this illadvised proposal.  

The Health Department would “develop a list of critical prescription drugs for which there is significant public interest in ensuring rational pricing by drug manufacturers.”  That prerequisite is certainly subjective.  A particular drug may appear to be expensive for a particular course of treatment, but if it prevents years of hospitalization and treatment that would have cost hundreds of thousands of dollars, while allowing a patient to return to a productive life, that would certainly be considered rational.  

This proposal is an unwarranted and unnecessary fishing expedition that will do nothing to help patients.  The Health Department would be able to obtain scads of proprietary information from pharmaceutical manufacturers such as “the actual cost of developing, manufacturing, producing, (including the cost per dose of production), and distributing such drug;” research and development costs; payments to predecessor entities; administrative and marketing costs; average rebates and discounts provided per payer type; and prices to purchasers both outside of the United States and in New York.  And while the budget proposal states that all of the information gathered will be confidential and shall not be disclosed by the government, it contains the proviso “except as the commissioner determines is necessary to carry out the provisions” of the policy.  Some of the information requested from manufacturers is so sensitive that its exposure will kill innovation and hurt competition.  That will drive up costs, not lower them.  

Research and development outlays can already be found in company 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 ultimately successful, but not for the originally intended indication and sometimes years later.  

It is understandable that legislators, government officials, 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.  For example, encouraging companies to develop drugs that treat the same condition, such as Hepatitis C, will drive down costs.  Since it takes 10 to 12 years to get a new drug through the Food and Drug Administration (FDA) approval process and costs about $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.  And Congress is holding the FDA’s feet to the fire to reduce the backlog of more than 4,000 generic drug applications.  

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 reject the governor’s budget proposal concerning “critical” prescription drugs.  

Sincerely,
Thomas Schatz