Dear Chairman Alexander, Ranking Member Murray, and Members of the Committee:
On behalf of National Taxpayers Union, I write to encourage you to reject any amendments to S. 1895, the Lower Health Care Costs Act, that would allow for the importation or reimportation of prescription drugs from foreign countries. We believe that allowing importation or reimportation will threaten Americans’ access to lifesaving, costsaving drugs, and will undermine the policies that have helped make the U.S. a leader in pharmaceutical innovations.
It is understandable that the Committee seeks to address prescription drug prices, especially at a time when the costs of many health products and services are rising. However, we urge you to address drug prices in ways that preserve the delicate balance between protecting patients and providing for continued breakthroughs in pharmaceutical research that save tax dollars in the long run.
The U.S. has been more successful than any other country in striking this balance. Prescription drug expenditures make up the same share of total national health expenditures today (10 percent) as they did in 1960,1 while Medicare Part D patients’ use of lowercost generic drugs is rising (from 61 percent of all prescriptions in 2007 to 86 percent in 2016).2 Prescription drugs also offer cost savings for an overburdened U.S. health system. According to the National Bureau of Economic Research, every $1 increase in prescription drug spending is associated with a $2.06 reduction in Medicare spending.3
As a nonpartisan taxpayers’ organization, we have several concerns with proposals to import or reimport drugs from foreign countries. First and foremost, the Congressional Budget Office (CBO) has cast doubt on the impact importation would have on overall drug spending. CBO noted that the reduction in drug spending from allowing importation from 25 industrialized countries “would be small,” and would be “negligible” if restricted to Canada alone.4
CBO also rightly noted that several features of the U.S. health system distinguish it from foreign markets: 1) the importance of research and development, 2) the central role regulation plays in the approval and marketing of drugs in the U.S., and 3) the lack of direct price controls in the U.S. compared to industrialized foreign countries. These unique features identified by CBO contribute to our concerns with current importation proposals. Allowing importation or reimportation of prescription drugs could lower the incentives for pharmaceutical companies to invest in research and development of new, lifesaving drugs, undermine policies that have allowed Americans access to the latest and greatest treatments, and expose our market to the ineffective price controls of other countries.
We outlined the dangers of drug importation, and a better path forward, in a Policy Paper released in 2016, “Trading in Trouble”:
“Importation would undermine the entrepreneurial economy, introduce price controls, trample on property rights, abet protectionism, harm U.S. exports, encourage socialistic health care policies, and, ultimately, burden taxpayers.”5
We encourage the Committee to reject importation proposals, and consider policy solutions that rely on sensible regulatory approaches and more pricing freedom. Thank you for your consideration, and should you have any questions, I am at your service.
Sincerely,
Andrew Lautz
Policy and Government Affairs Associate
1 Centers for Medicare & Medicaid Services. (2018). “National Health Expenditure Data.” Retrieved from: https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/NationalHealthAccountsHistorical.html (Accessed June 24, 2019.)
2 U.S. Department of Health and Human Services Office of the Assistant Secretary for Planning and Evaluation. (2018). “Savings Available Under Full Generic Substitution of Multiple Source Brand Drugs in Medicare Part D.” Retrieved from: https://aspe.hhs.gov/system/files/pdf/259326/DPMultisourceBrandsinPartD.pdf (Accessed June 24, 2019.)
3 Shang, Baoping, and Goldman, Dana P. “Prescription Drug Coverage and Elderly Medicare Spending.” National Bureau of Economic Research, September 2007. Retrieved from: https://www.nber.org/papers/w13358 (Accessed June 24, 2019.)
4 Baker, Colin. “Would Prescription Drug Importation Reduce U.S. Drug Spending?” Congressional Budget Office, April 29, 2004. Retrieved from: https://www.cbo.gov/sites/default/files/108thcongress20032004/reports/0429prescriptiondrugs.pdf (Accessed June 24, 2019.)
5 Sepp, Pete. “Trading in Trouble: How Drug Importation Undermines FreeTrade Principles and Harms Taxpayers.” National Taxpayers Union, July 14, 2016. Retrieved from: https://www.ntu.org/publications/detail/tradingintroublehowdrugimportationunderminesfreetradeprinciplesandharmstaxpayers (Accessed June 24, 2019.)