All summer, Washington, D.C. has been waiting to see what Speaker Pelosi’s top aide Wendell Primus and staff would produce in the way of a drug pricing bill.  It has been known since July that something would be released in September after Congress returned from its summer break.  It is finally here, H.R. 3, Drug Price Negotiation Bill Summary and it is a horrendous.

To be clear, this is a summary, not detailed legislative language, so it is hard to discern exactly what the proposal would do with respect to drug pricing or find other nefarious items among its various components.  According to The Hill, the proposal that was leaked is an out-of-date draft summary.  It was likely released to garner an early response from the socialist wing of Pelosi’s caucus that have been hard to please over drug pricing.  Because it is a draft, it could change.

It had been widely reported that binding arbitration, a concept promoted by MedPac, could be the methodology used to “negotiate” drug prices, but this was vigorously opposed by the Congressional Progressive Caucus, whose members wanted price controls and compulsory licensing (the ability to steal a patent.)  If this recently released iteration becomes the final bill, they will likely be pleased with most of it and that should scare everyone.

Notably, the summary does not utilize binding arbitration to determine drug pricing, a proposal that Citizens Against Government Waste (CAGW) and other conservative, free-market groups strongly opposed.  Government binding arbitration was always government price controls masquerading as a fair negotiation process, since the government would write the rules, pick the arbitrator, and decide which drugs would go through the process.  That is not negotiating.

H.R. 3. would simply utilize the same price control proposals that Democrats have been pushing for years and which now, unfortunately, have been adopted by the Trump administration and other wayward Republicans.

H.R. 3 would allow the Secretary of Health and Human Services (HHS) to directly “negotiate” prices on the top 250 drugs with the greatest cost to Medicare and to the entire commercial U.S. healthcare system.  The manufacturers of drugs that are already in heavy rotation in both the commercial and government healthcare space would be putting their very existence at risk by refusing to participate in the process. The penalty for no participation would be an excise tax equal to 75 percent of annual gross sales in the prior year for the drug under consideration.

The bill would adopt the Trump administration’s ill-advised international pricing index (IPI) proposal, describing it in typical leftist lingo as an effort to “end drug companies ripping off Americans.”  The culprits who are really ripping off Americans are countries that utilize price controls and draft off U.S. funded research and development.

The price negotiated would be based on a drug’s cost in six countries:  Australia, Canada, France, Germany, Japan, and the United Kingdom.  The cost to Medicare would be no more than 1.2 times the volume-weighted average found in the six countries and would also extend to the commercial market.

The bill summary also makes changes to the structure of Medicare Part D by eliminating the coverage gap and would establish a 25 percent cost sharing between the annual deductible and catastrophic threshold.  Insurers and drug manufacturers would be responsible for some unknown percentage of the costs since the summary is silent on the exact amounts.

What is clear is H.R. 3 would be very prescriptive and heavy on government mandates.

There have been discussions about changing how Medicare Part D operates to give seniors more relief after they reach a certain out-of-pocket amount and enter the catastrophic stage.  One idea has been offered by the American Action Forum, which relies more on market-forces, not heavy-handed government regulation, to lower costs.

From excise taxes, to inflationary rebates, to coercive government intervention, H.R. 3 is a blueprint for destroying American biopharmaceutical innovation within a few years.  Investment in this remarkable life-saving industry will dry up and move to other promising industries, like telecommunications or robotics, should H.R. 3 become law.  

Forget seeing the drug that will cure Alzheimer’s, Parkinson’s disease or other challenging maladies that require intensive research and depend on dedicated funding streams over long timeframes.

H.R. 3 represents the typical socialist view that everything can be obtained with little effort and that big government can provide all the answers.

It must be rejected.