Louisiana - Oppose HB 384

April 3, 2018

Health and Welfare Committee
900 North Third Street
Baton Rouge, Louisiana 70804      

Dear Representatives,

You are scheduled to hear HB 384, which would create and provide for a state prescription drug importation program, on Thursday, April 5, 2018.  On behalf of the 18,051 members and supporters of the Council for Citizens Against Government Waste (CCAGW) in Louisiana, I urge you to oppose HB 384.  This bill would simply adopt Canada’s price control scheme and fail to lower the cost of prescription drugs in your state.

The bill includes a provision to provide for importation of Canadian drugs, which would set Louisiana on a collision course with the federal government and the Food and Drug Administration (FDA).  The FDA prohibits “the interstate shipment (which includes importation) of unapproved new drugs” and makes clear that “… unapproved new drugs are any drugs, including foreign-made versions of U.S. approved drugs, that have not been manufactured in accordance with and pursuant to an FDA approval.”

The FDA frowns upon importation, as it “cannot assure” the safety and efficacy of imported products.  Importation opens the door to counterfeiting and diversion.  HB 384 also assumes that Canadian pharmacists, or their government, would turn over their supply of drugs to Louisianans without significantly raising their cost, or that U.S. pharmaceutical manufacturers would willingly send more drugs to Canada than its population requires.

I urge you to read the February 2018 Council of Economic Advisers (CEA) report, “Reforming Biopharmaceutical Pricing at Home and Abroad.”  The report goes into detail about how price controls disrupt the marketplace and reveals that “pharmaceutical innovators – and foreign governments – across the world rely on America’s patients and taxpayers to finance critical research and development.”  The CEA report notes that the U.S. is the “engine of worldwide pharmaceutical innovation, accounting for an estimated 46 percent of OECD [Organisation for Economic Co-operation and Development] patented pharmaceuticals sales.”  The closest competitor to the U.S. is Japan at 15 percent, then Germany at 7 percent, and then the United Kingdom at 5 percent.  Canada’s patented pharmaceuticals are not even mentioned.

HB 384 also demands that pharmaceutical manufacturers which produce a drug with a wholesale acquisition cost (WAC) of more than $10,000 for a course of treatment provide notice to the Louisiana Department of Health if the price will be increased by seven and one-half percent over a period of 12 months, or at least 18 percent over 36 months.  Furthermore, the bill would require the pharmaceutical company to provide proprietary information to justify the price increase, such as total profit derived from the sales of the drug, total expenditures of the pharmaceutical manufacturer on materials and manufacturing for the drug, and total research and development costs to produce the drug.

A WAC is essentially a list price and does not represent what patients ultimately pay after rebates, discounts, or other price concessions.  Furthermore, it would be difficult to report research and development costs for a particular drug because many pharmaceuticals are investigated for a few years, put aside, and then researched again, while other drugs fail in clinical trials but their scientists must still be paid.

While prescription drug prices generate much media attention and controversy, and it is understandable that legislators, government officials, and consumers express their concern, drug importation is not the answer.  The best approach to lowering drug prices is an environment that fosters competition and innovation.  It takes 10 to 12 years to get a new drug through the Food and Drug Administration (FDA) approval process, which costs an average of $2.6 billion.  Fortunately, Congress has taken steps to speed up clinical trials and the approval process, though more remains to be done.

One way to lower prices would be for Louisiana legislators to ask their U.S. congressional delegation to continue to hold the FDA’s feet to the fire to make sure the backlog of generic drugs awaiting approval can be cleared.  This would be a far more effective way to help bring down the price of prescription drugs than passing this harmful and counterproductive bill.

Another option is to follow the CEA’s advice and encourage improved trade policy so that other nations would pay their fair share of biopharmaceutical research and development and not ride free on U.S. taxpayers and patients.

On behalf of Louisiana taxpayers, I ask you to oppose HB 384.

Sincerely,

Thomas A. Schatz

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