Beware of These Health Care Policy Amendments during Reconciliation

Dear Senator:

On behalf of the members of National Taxpayers Union (NTU) in all 50 states, I write to urge your extreme caution over two proposals pertaining to federal prescription drug policy that will likely arise during the current debate over budget reconciliation. These plans have a long lineage that should give pause to fiscal conservatives on both sides of the aisle.

As a nonpartisan citizen group that works for lower taxes, limited government, and economic freedom, NTU has long taken an interest in health policy. We have stressed the need for reforms that strengthen the patient-provider relationship, empower consumers with more choices, increase oversight of government programs, and allow markets to deliver more effective care. Indeed, as an NTU-commissioned Task Force on Health Care reported more than 35 years ago, “Government intervention in the health care delivery process throughout the course of this century is the major cause of high prices and inefficiencies in the health care industry today.” Such is still the case in the 21st Century, which is why NTU recommends opposition to the following two potential amendments:


1. Importing Other Countries’ Price Controls:

We have long believed that drug importation is fraught with fiscally and economically detrimental consequences for taxpayers and consumers alike. Using data from a Congressional Budget Office study, NTU concluded in 2003 that the cost savings from importation may not be as great as advocates suggest.

Any short-term windfalls would likely be offset by other financial consequences associated with importation – consequences whose damage could grow. These schemes would allow drugs to be shipped at prices set by foreign countries, thereby reducing resources necessary to research cures for some of the world’s most debilitating illnesses. While NTU supports free trade and free markets, taking advantage of lower prices set by foreign governments is not the same as the free market determining the fair value of a drug.  It is the antithesis of free trade. Moreover, with any sudden influx of exports from Canada or other countries, pharmaceutical companies will be forced to change their current pricing structures, offering fewer alternatives for lower-priced drugs both here and abroad.

Instead of pursuing this risky strategy, the Senate should work to streamline the approval process for new and generic drugs and limit lawsuit abuse, thereby decreasing drug prices and increasing drug choices for patients across the board. NTU urges Senators to vote “No” on any amendment to impose a drug importation regime.


2. Tearing Down “Non-interference” Protections:

More than a decade has passed since the enactment of Medicare Part D – an entitlement program over which NTU expressed grave reservations and strenuous concerns about potential costs. However, some portions of the program attempted to introduce market-based mechanisms into the benefit process. Among these were “firewalls” that allowed drug manufacturers to negotiate prices with pharmacies and plan sponsors. Furthermore, the government was prohibited from requiring formularies or price structures for drug reimbursements under Part D.

These safeguards have worked well in allowing lifesaving drugs to be brought to patients in an efficient and cost-effective manner. Earlier this year, an amendment to the Senate Budget Resolution would have upset this salutary balance by requiring the Secretary of Health and Human Services to “negotiate prescription drug costs under the Medicare program, particularly with inverted corporations that benefit from Medicare program reimbursements.”

For all the reasons articulated above, attempting to tighten government’s grip on health care pricing would undermine the cause of free-market health care reform. Worse, it would bring us closer to emulating some of the single-payer type systems found in high-tax countries around the world. Indeed, single-payer legislation introduced in the U.S. Congress has been repeatedly scored by NTU’s research affiliate as precipitating annual increases in federal outlays of more than $1 trillion.

Just as troubling, this proposal would have taken the U.S. farther away from simplified, nondiscriminatory tax policy by taking specific aim at “inverted” companies. Fiscal conservatives should abhor such punitive measures, and concentrate instead on addressing the high rates, complexity, and lack of territoriality that mark our uncompetitive corporate tax system. NTU urges a “No” vote on any amendment to weaken non-interference protections.

Should roll call votes occur on either of these matters, NTU would include them in our annual Rating of Congress.

Pete Sepp