After the U.S. biopharmaceutical industry led the way to save millions of lives by creating COVID-19 vaccines in record time, one would think that members of Congress would express their gratitude at the very next opportunity.  Instead, on Tuesday, March 23, Senate Health, Education, Labor and Pensions Subcommittee on Primary Health and Retirement Security Chairman Bernie Sanders (I-Vt) held a hearing entitled, "Why Does the US Pay the Highest Prices in the World for Prescription Drugs?”  His opening remarks demonstrated his longstanding and apparently intransigent scorn for an industry that produces life-saving medicines not just for COVID-19, but also hundreds of other chronic and deadly diseases.  As expected, he used the hearing to introduce three bills that would place socialistic price controls on this vibrant industry, or import them.

The first bill is “The Prescription Drug Price Relief Act” that would set the price for pharmaceuticals in the U.S. to the median price in Canada, France, Germany, Japan, and the United Kingdom.  The second bill, “The Medicare Drug Price Negotiation Act,” would direct the Secretary of Health and Human Services to negotiate for a low price in Medicare Part D.  The third bill, “The Affordable and Safe Prescription Drug Importation Act,” would allow patients, pharmacists and wholesalers to import certain prescription drugs from Canada and other major countries.

Senator Sanders has introduced similar legislation in prior Congresses and all are problematic because they utilize price controls, either directly or indirectly, would fail to lower drug costs, and lead to fewer innovative drugs that would tackle complicated diseases like Alzheimer's, heart disease, and cancer.  Canadian officials have stated they will not export in bulk their pharmaceuticals, many of which are in short supply, to U.S. citizens.  But setting up a system to allow importation will encourage unscrupulous characters to manufacture and sell dangerous counterfeit drugs through dishonest health providers or on the internet via fake Canadian websites, which will be used by unsuspecting patients.

Sen. Sanders spent a few minutes expounding on the fact that a Canadian scientist discovered insulin and “sold the patent rights for insulin for just $3 because [he] believed it should be accessible to everyone who needed it” and said the price for insulin had gone up by over 300 percent.”  He neglected to mention the original insulin was made from cattle and pigs pancreases and could cause allergic reactions.  The first synthetic human insulin was genetically engineered in 1978.  Thanks to continued research, insulin comes in many different forms, enabling people to use an insulin based on their lifestyle and individual needs.

Sen. Sanders asked, “a very simple question” of one of the witnesses: “Why is it that in Canada - tell us simply - you can purchase the same exact, widely used product for one tenth of the price that it costs in the United States?”  Canada Research Chair in Health Justice at the University of Toronto Nav Persaud, MD, MA, provided a very simple answer.  He said, “… patented medicines have their prices regulated in Canada because there is not going to be competition.  If you want to pay a reasonable price for patented products, you have to regulate the prices.  That’s what done in other high-income countries, not just in Canada.”  Sen. Sanders asked if there was any other country on earth that does not one way or the other regulate drug prices or allow pharmaceutical companies to decide their own price.  Dr. Persaud said, “no.”

A good follow-up question would have been how many innovative drugs does Canada introduce each year?  But that was not asked because the answer would have been very little.  The reason the U.S. leads the world in biopharmaceutical research is because most pharmaceuticals are still sold in a free market.

Both Sens. Bob Casey (D-Penn.) and Tim Kaine (D-Va.) brought up questions about Medicare bureaucrats negotiating drug prices, the implication being that no negotiation occurs in Medicare Part D drug benefit program.  While Sen. Kaine thinks ideas like adopting international reference pricing “is a good one” to bring down drug pricing, he may not know that citizens in other countries have less access to innovative drugs.

Currently, Medicare beneficiaries are offered a wide choice of prescription drug plans in the voluntary Medicare Part D program.  The plans compete with one another on quality and price.  Private-sector negotiations for these plans occur among pharmaceutical companies, pharmacy benefit managers, insurers, and pharmacists.  According to Kaiser Family Foundation, in 2021 there were 996 Part D plans offered across the country.  Furthermore, the Congressional Budget Office has repeatedly said that it is unlikely the secretary of Health and Human Services would be able to negotiate much lower prices unless given broad powers like the ability to design formularies and compulsory licensing, allowing the government to steal patents and permit someone else to manufacture the drug.

Ranking Member Susan Collins (R-Maine) zeroed in on some of the problems that occur when the government has complete authority on determining drug pricing and formularies.  She mentioned that although the Veterans Administration has the authority to get deep discounts, she receives complaints from many veterans they cannot get the drugs they need.  This was shown to be true in at 2013 report from The Lewin Group, which compared the VA national formulary with the two highest-enrollment plans in Medicare Part D, and  found that Medicare Part D provided “greater breadth of drug coverage than the VA formulary.”  For example, only 78 percent of the 274 most-prescribed drugs in the U.S. were in the VA formulary.  However, the two most popular Medicare Part D plans covered 97 and 95 percent of the drugs, respectively.  The study shows that Sen. Collins’ concerns about the VA’s limited drug formulary are longstanding.

A March 2019 Galen Institute paper by Doug Badger, “Examination of International Drug Pricing Policies in Selected Countries Shows Prevalent Government Control over Pricing and Restrictions on Access,” demonstrated that Americans have access to 89 percent of innovative drugs, including 96 percent of new cancer drugs, but in France, Germany, and Switzerland, citizens only have access to 48 percent, 62 percent, and 48 percent of new drugs, and 66 percent, 73 percent, and 54 percent of new cancer drugs respectively.

Citizens Against Government Waste (CAGW) agrees with American Enterprise Institute Resident Fellow Alex Brill, who testified that the best way to lower costs is to create an environment that allows more competition between generic and brand name drugs and brand to brand, or “me too” drugs.

Another witness, Professor of Medicine Harvard Medical School Aaron Kesselheim, MD, JD, M.P.H. called for a publicly funded independent organization to do comparative effectiveness studies.  He said the U.S. government should develop an entity designed to work like the Institute for Clinical and Economic Review (ICER).  This private sector, non-profit, non-partisan organization was founded in 2006 and has developed analytic methods to supposedly determine comparative effectiveness assessments on drugs and other treatments.

ICER’s methods in analyzing the “fair” cost for a pharmaceutical has been questioned and criticized.  A January 2020 Goldwater Institute report by Rafael Fonseca, M.D. and Naomi Lopez, “Deciding What a Life is Worth,” found that ICER uses arbitrary measures of people’s lives, called the quality-adjusted life year (QALY) and a cost-benefit analysis to determine how much should be spent on providing treatments or whether it should be used on a patient.  Simply put, a person with a low QALY, like someone who is old or disabled, should have less money spent on them. 

Pacific Research Institute Senior Fellow in Business and Economics Wayne Winegarden stated in a May 11, 2020 Forbes article, “ICER’s Cost Model Is Not Only Wrong, It’s Also Dangerous,” that ICER has “performed an incomplete analysis of remdesivir in order to produce a cost estimate that is, by definition, precisely wrong.”  (Remdesivir was one of the first therapies that was found to show promise in treating patients with COVID-19.)  He went on to say if the analysis was “just an academic exercise” over a particular medicine, the “consequences would be minimal.” 

But, considering ICER weighed in soon after the drug was recommended as a therapy for COVID-19, in the “short-term, the attempt to value the drug will make it more difficult to overcome the current pandemic and in the long-term the analysis will hurt any future response to a pandemic.”  For example, because the drug existed before COVID-19 as a possible therapy for chronic Hepatitis C but was not effective for that disease, ICER determined any research and development costs got a score of zero to help determine the cost-recovery price for remdesivir.  However, Winegarden wrote that ICER completely ignored the research that was needed to be done quickly for the clinical trial and the “all hands-on deck” response to see if the anti-viral medication was an effective treatment for COVID-19.

ICER sounds a lot like Great Britain’s government-run National Health Service’s advisory agency, the National Institute for Health and Care Excellence (NICE), which routinely denies patients access to innovative therapies.  If the ICER model becomes more widely adopted, it will lead to the same kind of rationing (meaning older and sicker people get less care and access to pharmaceuticals) that occurs in Great Britain and other countries with socialist/government-run healthcare.

If Sen. Sanders should succeed in passing his three price control bills, they would cause severe harm to U.S. pharmaceutical innovation but fit nicely with his plan for government-run healthcare where bureaucrats and politicians make the decisions on what kinds of drugs are developed and who gets what medical treatment.  In other words, the U.S. would look more like the rest of the world, where access to doctors, especially specialists, is limited, wait times are exorbitant, and the latest drugs and treatments are restricted.