February 12, 2016 

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

Dear Representative,

On behalf of the more than 1.2 million members and supporters of the Council for Citizens Against Government Waste (CCAGW), I am writing to express our opposition to H.R. 244, the “MAC Transparency Act,” which will interfere with the market dynamics that have done so much to keep costs low and beneficiary satisfaction high in Medicare Part D.

A “Dear Colleague” letter is being circulated, urging members to request a hearing on H.R.244 in the Committees on Energy and Commerce, Armed Services, and Ways and Means. CCAGW understands why members may be prone to support bills like H.R. 244, particularly in light of the recent extreme price hikes by Turing and Valeant Pharmaceuticals (which would not be covered under the legislation because they are single-source drugs). Indeed, the most significant impact of the bill would be to undermine the negotiations that occur among pharmacy benefit managers (PBMs), drug companies, and pharmacies. Such negotiations have succeeded in driving down the costs of prescription drugs, not raising them.

The MAC (maximum allowable cost) is utilized to ensure payers and PBMs are not paying significantly higher prices for drugs than the average acquisition cost paid by pharmacists. The system has increased both competition and the dispensing of generic drugs because it encourages pharmacists to shop around for the best deal. The cost savings are passed onto consumers and taxpayers.

While it may seem prudent to encourage “transparency” in payment procedures among the parties involved, government interference in market negotiations is not the answer. H.R. 244 would force participants in pharmaceutical negotiations to increase the disclosure of sensitive financial information, which in turn would increase both direct costs and litigation costs. As Emory University Associate Professor Joanna Shepherd pointed out in the May 2013 Cornell Law Review article, Is More Information Always Better?, such “regulations foster tacit collusion” and reduce the ability of pharmaceutical benefit managers to “negotiate discounts with pharmacies and rebates with drug manufacturers. As a result, drug prices will rise and total prescription drug spending will increase.”

Furthermore, H.R. 244 attempts to stifle the use of mail order pharmacies that provide convenience and specialty pharmacies that provide specialized care that save consumers, employers, and other payers billions of dollars.

Americans purchase a multitude of products every day. Confidential and intense negotiations among manufacturers, wholesalers, intermediaries, and retail establishments occur vigorously behind the scenes. Purchasers of healthcare services and prescription drugs, as well as taxpayers, are primarily concerned about final prices and good customer service. This is certainly true with pharmaceutical purchases under Medicare Part D.

H.R. 244 seems to be more about protecting pharmacy profits and much less about encouraging vigorous negotiations among PBMs, drug companies, and pharmacies in finding the best deal for the consumer. Therefore, I strongly urge you to oppose H.R. 244. All votes on H.R. 244 will be among those considered in CCAGW’s 2016 Congressional Ratings.

Sincerely,

Tom Schatz
President, CCAGW

Dear Representative, On behalf of the more than 1.2 million members and supporters of the Council for Citizens Against Government Waste (CCAGW), I am writing to express our opposition to H.R. 244, the “MAC Transparency Act,” which will interfere with the market dynamics that have done so much to keep costs low and beneficiary satisfaction high in Medicare Part D. A “Dear Colleague” letter is being circulated, urging members to request a hearing on H.R.244 in the Committees on Energy and Commerce, Armed Services, and Ways and Means. CCAGW understands why members may be prone to support bills like H.R. 244, particularly in light of the recent extreme price hikes by Turing and Valeant Pharmaceuticals (which would not be covered under the legislation because they are single-source drugs). Indeed, the most significant impact of the bill would be to undermine the negotiations that occur among pharmacy benefit managers (PBMs), drug companies, and pharmacies. Such negotiations have succeeded in driving down the costs of prescription drugs, not raising them. The MAC (maximum allowable cost) is utilized to ensure payers and PBMs are not paying significantly higher prices for drugs than the average acquisition cost paid by pharmacists. The system has increased both competition and the dispensing of generic drugs because it encourages pharmacists to shop around for the best deal. The cost savings are passed onto consumers and taxpayers. While it may seem prudent to encourage “transparency” in payment procedures among the parties involved, government interference in market negotiations is not the answer. H.R. 244 would force participants in pharmaceutical negotiations to increase the disclosure of sensitive financial information, which in turn would increase both direct costs and litigation costs. As Emory University Associate Professor Joanna Shepherd pointed out in the May 2013 Cornell Law Review article, Is More Information Always Better?, such “regulations foster tacit collusion” and reduce the ability of pharmaceutical benefit managers to “negotiate discounts with pharmacies and rebates with drug manufacturers. As a result, drug prices will rise and total prescription drug spending will increase.” Furthermore, H.R. 244 attempts to stifle the use of mail order pharmacies that provide convenience and specialty pharmacies that provide specialized care that save consumers, employers, and other payers billions of dollars. Americans purchase a multitude of products every day. Confidential and intense negotiations among manufacturers, wholesalers, intermediaries, and retail establishments occur vigorously behind the scenes. Purchasers of healthcare services and prescription drugs, as well as taxpayers, are primarily concerned about final prices and good customer service. This is certainly true with pharmaceutical purchases under Medicare Part D. H.R. 244 seems to be more about protecting pharmacy profits and much less about encouraging vigorous negotiations among PBMs, drug companies, and pharmacies in finding the best deal for the consumer. Therefore, I strongly urge you to oppose H.R. 244. All votes on H.R. 244 will be among those considered in CCAGW’s 2016 Congressional Ratings. Sincerely, Tom Schatz President, CCAGW