A trio of U.S. senators released a bill on Friday that would add a layer of federal bureaucracy to the government rate-setting proposals that some have pitched as a way to control drug prices.
According to Axios, the legislation, dubbed The Prescription Drug Affordability and Access Act:
“...would create an independent agency to determine list prices of prescription drugs. If a drug company doesn't comply with the determined price, the HHS secretary could void the company's exclusivity period and allow other companies to produce the drug.”
In many ways, this proposal goes beyond the egregious rate-setting in the “Medicare for All” proposals from Sens. Bernie Sanders (I-VT) and Elizabeth Warren (D-MA), and even beyond the onerous, punitive taxes in Speaker Nancy Pelosi’s H.R. 3.
By focusing on list prices rather than on price negotiations with drugmakers - as Medicare for All and H.R. 3 do - Sens. Sanders, Cory Booker (D-NJ), and Kamala Harris (D-CA), the new bill’s co-sponsors, are proposing a more aggressive price-control scheme than even Speaker Pelosi has offered. Their proposal also includes punitive measures similar to H.R. 3 when companies fail to accept the government’s rate.
As a reminder, the Speaker’s office framed the provisions in H.R. 3 as a “voluntary, bi-lateral negotiation process,” even though pharmaceutical companies would face an up to 95 percent tax (on their gross sales of a drug) for refusing to accept the government’s price. This, NTU has pointed out, is closer to extortion than a negotiation.
The new legislation from Sanders, Booker, and Harris, though, drops any pretense of a negotiation. Instead, according to The Hill, drugmakers large and small would be forced to submit new treatments and cures to a new federal entity with an appropriately disturbing, even Orwellian, name: the “Bureau of Prescription Drug Affordability and Access.” Drugmakers would also:
“...submit to the bureau the cost of research and development, the cost of the drug and of comparable medications in other countries and the federal investments that contributed to the drug's discovery and production.”
The Bureau would determine “an appropriate list price” based on that information “and other factors,” according to The Hill.
Beyond the numerous negative consequences of government rate-setting - including likely supply constraints, irreparable harm to research and development, and the disproportionate pressure placed on small biopharmaceutical companies - the Sanders/Booker/Harris bill would add yet another layer of federal bureaucracy to an already long and cumbersome FDA approval process.
NTU has argued that the federal government should be carefully and responsibly reducing regulatory barriers to bringing prescription drugs and biological products to market. This bill would raise hurdles, adding cost and time to what is already a laborious undertaking.
And if the pharmaceutical company does not approve of the government’s list price - even one, presumably, that comes in below the costs the company incurred to make and market the drug - then that’s simply too bad for them. The HHS secretary could march in, “void the company's exclusivity period and allow other companies to produce the drug,” according to Axios.
To review: the government would set the price of a drug, and confiscate the intellectual property rights on that drug if the manufacturer does not agree with the government’s price. It is difficult to understate the chilling effect this would have on investment in biopharmaceutical research - especially in the small companies that are responsible for a significant proportion of the innovation - and on the pursuit of new cures.
A more honest approach from Booker, Sanders, and Harris would be to simply nationalize the American pharmaceutical industry, bringing research, development, approval, marketing, delivery, and innovation under the federal government’s purview. That is what their proposal would lead to in practice, if it does not drive pharmaceutical companies overseas first.