Conservatives Behaving Badly on Drug Pricing | Citizens Against Government Waste
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Conservatives Behaving Badly 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.


Conservative politicians like to say they are for free markets, competition, and property rights to promote innovation and lower prices of goods.  But when it comes to pharmaceuticals, too many of them go careening off the freedom road to promote socialist policies.  They fail to recognize the years of expensive clinical trials and complicated protocols, the thousands of failed prospects that still must be paid for, and the lengthy Food and Drug Administration (FDA) approval process to get just one drug into the marketplace. 

From adopting foreign price controls, to using reference-pricing schemes, to allowing importation of foreign pharmaceuticals, politicians advocate for these flawed policies in an Orwellian way by using terms like negotiate, increasing competition, transparency, and free trade to describe policies that in the short term would lower prices but do real harm to consumers in the long term.

While these ideas have been proposed for several years, they have gained momentum from the Trump administration’s October 2018 Advanced Notice for a Proposed Rulemaking for an International Pricing Index (IPI) model for physician-administered drugs under Medicare Part B.   This 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.

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.

The latest iteration of adopting foreign price controls is found in S. 977, the “Transparent Drug Pricing Act” sponsored by Sen. Rick Scott (R-Fla.)   In addition to interfering in insurance price sharing policies, the bill would set the retail price for a U.S.-dispensed drug to the lowest list price found for the same drug in Canada, France, Germany, Japan and the United Kingdom.

In the “states go wild” category, so-called free market politicians across the country are sponsoring and supporting drug importation bills, mostly from Canada.  At least 16 state legislatures introduced importation bills in 2019 and many are still being debated.  The otherwise stalwart conservative Florida Governor Ron DeSantis (R) pushed for such a program in his state.  Calling drug price disparities between the U.S. and Canada as “indefensible and inexcusable,” he too ignores Canada’s infinitesimal biopharmaceutical research.  Republicans in the state legislature, that considered themselves to be fiscal, free-market conservatives, agreed and the bill was passed.

Supporters of importing drugs from Canada ignore the likelihood Canadian pharmacists will add a handling charge that would negate any savings or that pharmaceutical companies would blithely send more supply to a Canadian Province than its population can use.  They ignore that purchasing pharmaceuticals outside the current closed U.S. system introduces enormous risk to the supply chain and that no Health and Human Services secretary or FDA commissioner has ever said such drugs could be certified as safe and effective.  Perhaps that is what Florida’s elected representatives are relying on.

There are better approaches for conservatives to champion that would be effective instead of destructive.  The first would be to respect U.S. pharmaceutical intellectual property and reject foreign price controls.  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 change this disparity through better trade deals and have our foreign partners contribute to research, not take advantage of it.  President Trump’s trade deal with Canada and Mexico largely embraces these principles and its adoption would go a long way to accomplishing these goals.

Another conservative policy prescription to lower drug costs would be to slash the red tape that pervades the FDA approval process for pharmaceuticals.  It takes an average of 12 years to collect the clinical data necessary and submit a New Drug Application before receiving FDA approval, at an average cost of $2.6 billion per approved compound.  The 21st Century Cures Act, passed in 2016, provides policies that would streamline the clinical trial and approval process.  The FDA could also continue its efforts to reduce the backlog of generic drugs.  Congress needs to maintain consistent oversight to make sure the FDA follows through on these initiatives.  These efforts would provide long-term solutions to high drug costs.  Adopting price controls that are used in socialized healthcare systems are short-term solutions that create long-term damage.

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