Ohio - Oppose IPI Budget Provision | Council For Citizens Against Government Waste

Ohio - Oppose IPI Budget Provision

State Action

May 6, 2019

Ohio House of Representatives
77 South High Street
Columbus, Ohio  43215

Dear Representative,

It is our understanding that the Speaker of the House introduced a rewrite of the budget that includes a provision that would adopt an international pricing index (IPI) should the Center for Medicare and Medicaid Services (CMS) adopt a similar measure for Medicare Part B.  On behalf of the 123,925 members of the Council for Citizens Against Government Waste (CCAGW) in the state of Ohio, I ask that you oppose this measure.

CCAGW opposes the Trump administration’s effort to use an IPI to lower costs for drugs administered by a physician under Medicare Part B.  Currently, Medicare Part B drugs are reimbursed at the average sales price plus six percent to cover handling costs.  The Trump proposal would align Medicare Part B payments for drugs with a composite of prices paid in foreign countries, ignoring the fact these countries utilize price controls or the threat of compulsory licensing to keep their drug costs down.  As a result, their single-payer health systems have destroyed their country’s biopharmaceutical research and rely on the U.S. innovation.  Countries with socialized healthcare systems use rationing to keep prices down and as a result, their citizens have less access to innovative drugs than do Americans.

According to the Association of the British Pharmaceutical Industry, in 2016 the U.S. led in total pharmaceutical R&D expenditures with 58 percent.  Japan came in next at 13 percent, followed by the U.K. at 7 percent.  Canada was at a measly 1 percent.

Medicaid already uses a price control system to lower drug costs, the Medicaid Drug Rebate Program.  Currently, it is 23.1 percent of the average manufacturer price (AMP) for innovative drugs and 13 percent of the AMP for generic pharmaceuticals.  Other government-sponsored drug benefit programs, such as the 340B discount program and the VA also use price controls.  Markets respond to pricing pressure as if it was an inflated balloon:  push down on one side and the other expands.  It should come as no surprise that drug costs are being shifted to the private sector because of government price controls.  Instead of expanding price-controlled systems, conservatives should be promoting free-market solutions for lowering drug costs.

One way would be to respect U.S. pharmaceutical intellectual property and reject foreign price controls in trade deals.  President Trump’s Council of Economic Advisors’ February 2018 report, “Reforming Biopharmaceutical Pricing at Home and Abroad,” recognized that “foreign, developed nations, that can afford to pay for novel drugs, free-ride by setting drug prices at unfairly low levels, leaving American patients to pay for the innovation that foreign patients enjoy.”  It is time to for our foreign partners to contribute to our research, not take advantage of it.

Ohio’s legislators should also ask their U.S. congressional delegation to hold the FDA’s feet to the fire to make sure the backlog of generic drugs awaiting approval can be cleared and that the provisions provided in the 21st Century Cures Act that streamline and speed up the clinical trial and approval processes are being implemented.

Conservative legislators should be promoting free-market alternatives for all aspects of healthcare, not adopting socialistic policies like IPI.  Doing this will make it more difficult to oppose single-payer schemes, such as the “Medicare for All” proposal by self-proclaimed socialist Sen. Bernie Sanders (I-Vt.).  CCAGW urges you to reject an international pricing index model for Medicaid.


Tom Schatz
President, CCAGW

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