As Speaker Nancy Pelosi (D-CA) presses forward on her sweeping prescription drug pricing proposal, H.R. 3, several of her Democratic colleagues are warning that a partisan, heavy-handed proposal could harm American patients and consumers. These Democratic members should be applauded for their focus on balanced solutions to reducing drug costs that protect America’s best-in-class biopharmaceutical sector, and NTU has several proposals in this space we believe can and should garner bipartisan support in Congress.
The May 3 letter, obtained by Politico, is led by Rep. Scott Peters (D-CA) and Jake Auchincloss (D-MA), and is co-signed by Reps. Kurt Schrader (D-OR), Kathleen Rice (D-NY), Stephanie Murphy (D-FL), Lou Correa (D-CA), Marilyn Strickland (D-WA), Frank Mrvan (D-IN), Josh Gottheimer (D-NJ), and Tony Cardenas (D-CA). The 10 Democratic Representatives warn:
As we have just seen with the lifesaving, record-breaking development of COVID19 vaccines and therapies, America benefits from the most innovative and capable researchers in the world, and from public-private partnership that encourages world-leading biomedical research and development.
...we must garner bipartisan, bicameral support [for legislation to bring down health care costs], with buy-in from a majority of Americans and stakeholders in the public and private sectors. If this pandemic has taught us anything, it’s that we all, truly, must be in this together.
Though H.R. 3 was not specifically mentioned in the letter, Politico reported that the letter “signal[s] opposition” to Speaker Pelosi’s package and -- with narrow margins in the House -- could sink the Speaker’s hopes to pass the bill this year.
NTU shares these lawmakers’ concerns with H.R. 3. As we wrote to the House Committee on Education and Labor in May there are several major problems with the legislation as written, including but not limited to:
- Forcing the federal government to negotiate prescription drug prices for dozens of brand-name products on a nationwide basis, disrupting the current Part D system that allows privately-managed prescription drug plans and manufacturers to negotiate prices using existing tools like formulary placement, tiering, and utilization management;
- Making the negotiation process severely one-sided by punishing manufacturers with an up to 95-percent excise tax on gross sales of a given product should they fail to agree to the government-set price for a drug; this effectively turns the so-called “negotiation” between Medicare and manufacturers into an extortion by the federal government;
- Rigging the “negotiation” from the start with a maximum price that is tied to the average pricing for a prescription drug in foreign countries that, by and large, have centralized, government-set prices; and
- Allowing private payers, such as health insurers and self-funded plans, automatic access to the government-set price, rather than retaining the existing system where manufacturers and payers negotiate prices as market actors; and
- Punishing all manufacturers, brand and generic, with a mandatory rebate -- which could fairly be called a tax -- if they raise prices faster than inflation.
All of these provisions in H.R. 3 could turn the incumbent “public-private partnership” mentioned by the Democratic lawmakers in their letter into a one-sided, extortionary relationship in which the government taxes small and even large manufacturers out of existence. It is not a responsible path forward for prescription drug policy that protects taxpayers, consumers, and patients.
Instead, NTU has regularly pointed to a bipartisan roadmap we believe could pass Congress this year:
- Redesign the Medicare Part D benefit, protecting seniors with the first-ever annual out-of-pocket (OOP) cap for prescription drugs and protecting taxpayers with changes to the catastrophic portion of the benefit;
- Reduce distortionary rebates -- especially in the Medicaid program -- that push the costs of researching, developing, manufacturing, and distributing prescription drugs onto other, often private, payers in the health system;
- Pursue light-touch legislation that offers flexibility to patients experiencing high OOP costs for prescription drugs, such as allowing patients to spread their payment of OOP expenditures over several months;
- Retain the robust research and development (R&D) incentives that make the pharmaceutical industry a market leader in R&D intensity, especially by ensuring companies can continue to fully and immediately expense their R&D expenditures (which reduces the taxes they owe the federal government); and
- Pursue free trade agreements that eliminate often excessive prescription drug price controls in foreign countries, which -- like distortionary rebates in federal health programs -- pushes the cost of prescription drug development and distribution onto private payers in the U.S.
Given existing bipartisan support for initiatives like Part D redesign, and longstanding bipartisan support for robust free trade agreements and for the proper tax treatment of business R&D investments, we believe the above roadmap is a great place for Democrats and Republicans to start. Lawmakers can help reduce the impact of high prescription drug costs for some low- and middle-income taxpayers without also harming all taxpayers’ access to innovative treatments and cures. Indeed, the incredibly speedy arrival of three safe and highly effective COVID-19 vaccines (and counting) -- all made by U.S. manufacturers -- is proof positive that a robust, U.S.- and market-based system -- and, when necessary, public-private partnerships -- can save lives and, in the long run, save taxpayers money.