They’re Baaaaack – The Sequel | Citizens Against Government Waste

They’re Baaaaack – The Sequel

The WasteWatcher

In their never-ending quest to run roughshod and exert control over the research-intensive biopharmaceutical industry, socialists in Congress have introduced various price-control bills.  For some reason they continue to think innovative drugs that cure cancer or other chronic diseases, such as hepatitis C, are whipped up in a back room with a 1970s-style “Mr. Wizard’s Chemistry Set” and the government can arbitrarily determine what an appropriate price should be with no disastrous consequences.  They often rely on the old chestnut that it takes a few cents to manufacture a pill.  That may be true for the second or third pill on the assembly line, but it takes, on average, $2.6 billion to manufacture the first pill that works.

The parade of horribles being introduced is nothing new.  Price-control bills for drugs are routinely introduced in Congress.  Most sponsors of these bills should know better.  They were around in the 1970s when price controls and government manipulation in domestic oil supplies were used to drive down costs.  The result was shortages and long lines at gas stations.  Only when President Ronald Reagan removed oil price controls and abolished hundreds of regulations on the industry did oil production and gasoline prices stabilize.

Sen. Bernie Sanders (I-Vt) and Rep. Ro Khanna (D-Calif) announced their bill, “The Prescription Drug Price Relief Act,” on January 10, 2019.  Joining them were House Oversight and Government Reform Committee Chairman Elijah Cummings (D-Md.), Sens. Cory Booker (D-N.J.) and Richard Blumenthal (D-Conn.), and Reps. Jan Schakowsky (D-Ill.), Peter Welch (D-Vt.), Ilhan Omar (D-Minn.), and Joe Neguse (D-Colo.)

Bernie Sanders delivered his usual diatribe about the greedy pharmaceutical companies and excessive profits and relied on the same song and dance that other countries were selling the same drugs for much lower prices.  Sen. Sanders always neglects to mention that our nation, according to the Council of Economic Advisors (CEA), funds about 44 percent of the world's medical research and development, invests 75 percent of global medical venture capital, and holds the patent rights for most of the new medications.  Other countries use price controls to keep their drug costs down and, as a result, have either stifled or destroyed the research programs in their countries; riding instead on the back of the American taxpayers and consumers.

The bill would require that the Department of Health and Human Services (HHS) Secretary to compare the average domestic manufacturing price of a brand name drug with five reference countries: Canada, the United Kingdom, Germany, France, and Japan.  If the secretary determines a U.S. drug price is “excessive,” which is open to interpretation, then any government-granted exclusivities could be waived or voided, which would include revoking the drug’s patent and market-exclusivity.  Other companies would then be allowed to manufacture and sell the drug.

This bill sanctions government theft, as egregious as what communist China routinely does with U.S. intellectual property.  While there is a provision in the bill that requires the entity that agrees to manufacture the stolen drug to pay some sort of “reasonable” royalty to the patent holder, that will provide no comfort to investors.

This bill would destroy investment in biopharmaceutical development.  No investor would risk their assets to support the development of a pharmaceutical, knowing that after years of clinical research and navigating the Food and Drug Administration (FDA) approval process, the patent could be stolen by government edict.

Other bills discussed at the press conference include the "Medicare Drug Price Negotiation Act," sponsored by Peter Welch (D-Vt).  This bill would allow the HHS Secretary to “negotiate” drugs in Medicare Part D.  This legislation has been a perennial favorite of the leftists in Congress since Medicare Part D was established in 2003.  But there is no negotiation.  What the bill would allow is the secretary to implement price controls in Medicare Part D.

What sponsors of these bills never discuss is that robust private-sector negotiation already occurs in Medicare Part D.  Pharmacy benefit managers negotiate with pharmaceutical companies and pharmacists to come up with a price for a drug.  These negotiations have been successful, and the proof is in the results.  It bears repeating that in 2005, the Congressional Budget Office (CBO) estimated that Part D would cost taxpayers $172 billion in 2015; it’s actual cost in 2015 was $75 billion.  Furthermore, the CBO has stated switching to government negotiating, as opposed to using the private sector, would have a negligible effect on spending.

Another bill discussed was the "Affordable and Safe Prescription Drug Importation Act" that would allow drug importation of price-controlled medicines from Canada and other countries.  The legislation foolishly assumes other countries would simply turn over their price-controlled drugs to the U.S. market without a substantial mark-up.  Furthermore, once a drug leaves the U.S.’s closed distribution system, there is no guarantee that any drug imported back into the country would be safe and effective.  This legislation would invite bad actors to create bogus websites that would sell adulterated or counterfeit drugs.  The FDA has consistently stated regarding importation of drugs is it, “cannot assure that such products have been properly manufactured and are effective" and therefore, "their use would present an unreasonable risk."

Bernie and his fellow congressional socialists like to rant about how many people cannot afford their drugs, but they never discuss that pharmaceutical companies have helped 10 million people get help via patient assistance programs.  No one must choose between putting food on the table or taking their medications.

It is true that Americans pay more for drugs than patients in other countries; that is because someone must pay for the research and development and, fortunately or unfortunately, it falls upon us.  CAGW agrees with the recommendation in the CEA’s February 2018 report, “Reforming Biopharmaceutical Pricing at Home and Abroad,” that new trade agreements should be crafted to make sure foreign, developed nations no longer free-ride on U.S. funded innovation.

Sign Up For Email Updates

Optional Member Code