Nevada Lawmakers, Beware of Drug-Pricing Scheme

Dear Legislator:

On behalf of National Taxpayers Union’s (NTU) supporters in Nevada, I urge you to oppose Senate Bill 265, a new regulatory scheme that has precedent-setting implications for biopharmaceutical development. Just like the onerous tax policies NTU works to reform, burdensome government mandates on businesses can drive up compliance costs, deter economic development, and in turn affect the finances of families across the state.

The disclosure requirements in SB 265 would essentially allow the government to mis-portray and micromanage the basic business decisions of private companies.  Biopharmaceutical firms will be required to report proprietary pricing information, ironically creating the potential for cascading price hikes throughout the supply chain. Attempting to crack down on these eventualities by requiring third-party refunds pegged to foreign drug prices are fraught with other dangers. Voluntarily negotiated rebates could shrink, or other countries’ price controls – which already take a heavy toll on private-sector drug research and development – would seep into Nevada’s health care system. As a recent NTU Policy Paper warned, “importing self-destructive policies from abroad causes collateral damage here at home. That damage extends to, but is not limited to, our own exports, our workers, our shareholders, our efforts to liberalize and strengthen standards of international commerce, and the long-term savings that innovative drug therapies deliver for taxpayer-funded health care programs.”

These problems should be sufficiently daunting for fiscal conservatives to oppose SB 265, but there are more immediate reasons. According to fiscal notes for the bill, the budgetary impact in the FY 2017-2018 cycle alone is projected to exceed $5.5 million for administrative overhead, cost hikes for already-strained government health programs, and the loss of voluntary rebates. The burdens will only grow in future biennia.

Furthermore, potential start-ups in any field considering Nevada for their location could be tempted to look elsewhere, opting for states that do not impose such capricious market controls on private businesses. According to the Tax Foundation’s 50-state comprehensive business tax climate index, the Silver State ranks fifth-best; public officials must be cautious by avoiding proposals that could erode such a strong advantage.

Although SB 265 as drafted is targeted toward diabetes drugs, the legislation nonetheless constructs a corrosive regulatory and enforcement infrastructure that could eventually undermine the entire market-based foundation for prescription drugs. This foundation, while not perfect, nonetheless maintains the most elegant balance possible between innovation and cost discipline – a balance that heavy-handed attempts at government manipulation here and abroad have failed to improve. NTU recommends a “No” vote on SB 265.

Pete Sepp, President