The WasteWatcher: The Staff Blog of Citizens Against Government Waste

The Louisiana House Should Reject Pharmaceutical Price Controls

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.


The Council for Citizens Against Government Waste (CCAGW) has been tracking numerous bills in states throughout the country that are masquerading as a way to lower drug costs by implementing pharmaceutical cost transparency.  Supporters claim the legislation will help everyone understand how prescription drugs are priced by collecting information about manufacturing costs and pricing data that would be studied and analyzed by the government.  

There are two certain results from this type of legislation.  First, it will increase costs to taxpayers through the creation of new state agencies, or the expansion of existing agencies to review and analyze the data; to pharmaceutical companies, which will have to produce those huge reams of data, and to other players in the prescription drug marketplace, such as pharmacy benefit managers and insurers.  Second, the legislation will do absolutely nothing to lower the cost of drugs; instead, costs are likely to increase, while investment in new drugs is likely to decrease.

A bill pending before the Louisiana House and Governmental Affairs Committee, HB 436, is the subject of a May 17, 2017, hearing.  It is one of the more troublesome bills of its kind, and should be rejected by the legislature.

As noted in CCAGW’s April 13, 2017 Swine Line blog, “Pharmaceutical Transparency Legislation – Sounds Good but Foolhardy,” the supposed purpose of HB 436 is to “require drug manufacturers to provide information regarding prescription drug prices.”  But as the blog pointed out, its real purpose can be found on page 3, Section B: “Therefore, the legislature hereby declares, in order to contain prescription drug costs, it is essential to understand the drivers of those costs, as transparency is typically the first step toward cost containment.”  Cost containment means price controls.

The House and Governmental Affairs Committee reviews “all legislative instruments, messages, petitions, memorials and other matters” including “expenditures of funds by the Legislature” that includes “assignment of space in state buildings” or “laws enacted to reorganize the legislature or executive branches of government.”  This is not surprising because HB 436 creates a “Prescription Drug Review Committee,” a new bureaucracy within the Department of Insurance, to review drug prices.  It will be composed of nine members that will serve five years and “staff support from existing personnel within the department and meeting facilities as necessary.”  With so much data to review and analyze, that staff will become permanent.

The fiscal note on HB 436 estimates that it will cost taxpayers $425,500 over five years, or approximately $85,000 a year.  This figure is likely underestimating the cost, as the review committee must meet a minimum of four times a year, or at the call of the committee chairperson or the insurance commissioner, and the information that will be collected and analyzed will be far more voluminous and complex than expected.

Indeed, manufacturers will be forced to hire more accountants, lawyers and others to provide the material in a timely and accurate manner, that will raise costs.

The committee will also review the prices of drugs in other countries, most of which utilize price controls.  These foreign price control policies have resulted in meager biopharmaceutical research and development.  According to R&D Magazine’s Winter Global R&D Forecast (page 21), the U.S. dominates in the biopharmaceutical research sector at 56 percent, while Germany is the closest competitor at 16 percent.

Citizens Against Government Waste’s December 2016 report, “Pharmaceutical Price Controls: A Prescription for Disaster,” describes the destructive impact of price controls.  Those who were of driving age in the 1970s vividly remember the result of price controls placed on gasoline by the Nixon and Ford administrations: long lines, gasoline shortages, higher prices.  Eventually, President Ronald Reagan showed, and Congress learned, that market forces and competition bring down prices, not government intervention.  Unfortunately, as Section B specifies in the legislation, the committee will get around to “cost containment,” i.e. price controls, for the citizens of Louisiana.

Louisiana legislators should not make this mistake.  They should reject HB 436.

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