CAGW Weighs In on Important Announcements on Drug Pricing | Citizens Against Government Waste
The WasteWatcher: The Staff Blog of Citizens Against Government Waste

CAGW Weighs In on Important Announcements on Drug Pricing

The WasteWatcher is the staff blog of Citizens Against Government Waste (CAGW) and the Council for Citizens Against Government Waste (CCAGW). For questions, contact blog@cagw.org.


Two important news items regarding pharmaceutical prices have been announced within the past week:  a judge’s decision on a Trump administration rule that would have forced drug companies to provide the wholesale acquisition cost (WAC) of a drug in their television ads and a forthcoming executive order concerning drug prices.

On July 8, U.S. District Court for the District of Columbia Judge Amit Mehta struck down a Trump administration final rule that would have required pharmaceutical companies to disclose the WAC, or list price, of any drug in a television ad that had a price equal to or greater than $35 for a month’s supply.  The judge declared that the Department of Health and Human Services (HHS) lacked the authority to force manufacturers to reveal the WAC.  The rule would have taken effect July 9, 2019.  There is no indication yet if the administration will appeal the ruling.

When HHS Secretary Alex Azar announced the final rule in May 2019, he said, “Requiring the inclusion of drugs’ list prices in TV ads is the single most significant step any administration has taken toward a simple commitment:  American patients deserve to know the prices of the healthcare they receive.”

Because most patients do not pay list price, Citizens Against Government Waste (CAGW) spoke out against the rule when it was first proposed in October 2018.  We argued it was forced speech and would not provide more transparency to drug pricing, as the administration contended, but inaccurate information instead.  It would do nothing to lower drug costs. CAGW preferred a direct-to-consumer advertising proposal that the pharmaceutical industry designed for television ads that would guide patients, caregivers, and providers to relevant cost information and financial assistance to access drugs, including links to individual drug companies that could help patients obtain their products.

On July 5, as he was boarding Marine One, President Trump announced he planned to write an executive order that would give the U.S. “a favored nation status clause” for drugs, declaring the government would pay no more than any other country pays for prescription drugs.  Beyond the description the president made in the announcement, little else is known about the plan.  CAGW believes a lawsuit would immediately ensue and that such a policy would be declared unconstitutional since it would be up to Congress to set prices.

This idea sounds similar to the Trump administration’s proposed rule that CAGW objected to being used, the International Pricing Index (IPI), as well as legislation proposed by Sen. Rick Scott (R-Fl.), S. 977, which CAGW wrote about in a May 6, 2019 blog, “Conservatives Behaving Badly on Drug Pricing.”

The proposed IPI rule would peg a drug’s price under Medicare Part B, which are drugs administered by a physician, to a composite of international drug prices.  Countries that have adopted a socialized medical healthcare system utilize price controls and rationing to keep costs down.  Because the U.S. is one of the few countries that still has a free market healthcare system, our nation takes the lead in biopharmaceutical research and development.

CAGW has been supportive of many of the Trump administration efforts that have provided more flexibility, enabled state innovation, and increased competion in health insurance to lower healthcare costs, such as establishing Association Healthcare Plans, broadening utilization of Sec. 1332 waivers, and expanding the use of Short-Term Limited-Duration insurance plans.  CAGW is at a loss how the IPI, Sen. Scott’s legislation, or an executive order that would institute drug price controls in the United States would benefit our nation and patients in the long run or how adopting such a scheme would encourage foreign nations to pay their fair share of biopharmaceutical research and development.  It is an economic theory that leaves many conservatives baffled.  If anything, implementing such a policy would justify other countries’ bad behavior.

CAGW has argued that it would be better to write improved trade deals that would protect biopharmaceutical intellectual property, prevent compulsory licensing (stealing inventions), and make foreign countries, which can afford to do so, pay their share of U.S. funded research and development.

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