MInnesota - Oppose SF 1098 | Council For Citizens Against Government Waste

MInnesota - Oppose SF 1098

State Action

February 18, 2020

Committee on Judiciary and Public Safety Finance and Policy
Minnesota Senate
95 University Avenue, West
Saint Paul, MN 55155

Dear Senators,

Today you will consider SF 1098, the “Prescription Drug Price Transparency Act.” On behalf of the 35,546 members and supporters of the Council for Citizens Against Government Waste in Minnesota, I urge you oppose this legislation.

The Federal Trade Commission (FTC) has acknowledged that disclosure of pricing information could undermine beneficial market forces within the industry, leading to higher rather than lower prices.  A July 2, 2015 FTC policy paper, “Price Transparency or TMI,” stated, “But transparency is not universally good. When it goes too far, it can actually harm competition and consumers. Some types of information are not particularly useful to consumers but are of great interest to competitors. We are especially concerned when information disclosures allow competitors to figure out what their rivals are charging, which dampens each competitor’s incentive to offer a low price or increases the likelihood that they can coordinate on higher prices.”

The transparency pricing trigger in SF 1098 is dependent on the wholesale acquisition cost, which is essentially a list price and does not account for rebates, discounts, and other price concessions given for pharmaceutical distribution.

The reams of data that will be collected, much of it proprietary, would not accurately reflect the cost paid by consumers, would be of little value, and will not lower drug costs. For example, it could be difficult to calculate the cost to develop a particular drug. Often, a drug is shelved because it is not effective for the indication pursued. However, it may be researched later for another indication that is successful. Furthermore, many drugs never make it out of clinical trials because they are not safe or effective, yet the researchers must still be paid, and those costs are covered in approved drugs. If anything, this bill will raise drug costs because of the extra accountants, lawyers, and auditors who will be needed to produce the data in a timely manner to avoid civil penalties.

The price of prescription drugs generates much media attention and controversy, and it is understandable that legislators, government officials, and consumers are expressing their concern.  But, the best approach to lowering drug prices is an environment that fosters competition and innovation. 

It takes 10 to 12 years and an average of $2.6 billion to get a new drug through the Food and Drug Administration (FDA) approval process.

Competition lowers prices for any product, including prescription drugs. Minnesota legislators should ask their congressional delegation to continue to hold the FDA’s feet to the fire to make sure that generic drugs are approved in a timely manner and the agency continues to adopt modern techniques that streamline and speed up clinical trials and approval processes.

A February 13, 2020 President’s Council on Economic Advisers report, “Funding the Global Benefits to Biopharmaceutical Innovation,” shows how countries that use price controls are benefitting from U.S. biopharmaceutical research, paid for by U.S. taxpayers and consumers. The report states, “The global result of the ‘free-riding’ behavior of such countries is a slower pace of innovation, resulting in fewer potential new life-saving therapies for patients in all countries. … We find that if free-riding abroad was reduced, then the United States could institute domestic pricing policies that could save its patients and taxpayers $194 billion a year … without sacrificing the flow of new treatments.”

Faster FDA approvals and Congressional support of better trade deals that would require our trading partners to pay their fair share of biopharmaceutical research would be a far more effective way to help bring down the price of prescription drugs than passing harmful and counterproductive transparency language.

I urge you to vote against SF 1098.


Tom Schatz
President, CCAGW

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