NTU's state affairs team submitted the following letter to the Washington state Senate Ways and Means Committee concerning SB 5532.
February 1, 2022
Dear Members of the Senate Ways and Means Committee:
On behalf of National Taxpayers Union (NTU), the nation’s oldest taxpayer advocacy organization, we are writing to express our strong opposition to SB 5532, a bill which establishes a prescription drug “affordability” board. Despite well-meaning legislative intent and the importance of prescription drug affordability, Washington patients and taxpayers will not be well-served. Should this bill become law, prescription drugs will become less, not more, affordable. Before the Committee proceeds with any final deliberations, NTU urges you to bear in mind the following observations from a fiscal policy perspective.
SB 5532 aims to reduce prescription drug costs by creating a prescription drug affordability board tasked with reviewing drug costs and establishing an upper payment limit (UPL) on drugs deemed too costly. The UPL would apply to any entity in the state that administers drugs directly to patients, e.g., health insurers, health care providers, hospitals, clinics, and pharmacy benefit managers. By requiring the drug pricing board to set arbitrary upper limits, the legislature would essentially dictate and import price controls.
History has proven that price controls on any commodity produce unintended but consistently negative consequences. As it relates to prescription drugs, the consequences will be fewer dollars spent on the research and development of innovative cures and treatments and reduced patient access to life-saving drugs. Price controls will remove incentives that encourage manufacturers to pursue ground breaking prescription drug solutions.
SB 5532 fails to consider the negative impact of manipulating economic structure through regulatory provisions or legislative decree. If lawmakers elect to subjectively cap prescription drug prices, Washingtonians will have fewer prescription drug choices and will suffer as cures are delayed or undeveloped.
Additionally, taxpayers will be denied potential savings from drugs that could obviate more expensive treatments in government healthcare programs. The U.S. Congressional Budget Office has documented how innovator drugs, even those that are initially expensive for government health programs, yield long-term savings for taxpayers by replacing more expensive treatments such as surgeries and long hospital stays. Furthermore, over the long term, the economic and productivity benefits of healthier citizenries eventually translate into more robust revenue growth for governments.
SB 5532 incorrectly assumes that drug prices are solely determined by drug manufacturers. This legislation blatantly ignores the multiple stakeholders involved in determining what consumers ultimately pay for medications and overlooks the role of consumer drug coverage. For example, pharmacy benefit managers determine the terms of drug coverage for medications and then exert influence over which prescription drugs are included on formularies based upon rebates and discounts. NTU has previously expressed concern that negotiated rebates are not always passed along to the consumer, effectively failing to offset patient costs at the point of sale.
The stated purpose of this legislation is to lower prescription drug prices and reduce out-of-pocket costs for Washington patients. NTU shares these goals and recognizes the challenges faced by patients and taxpayers. To the extent public officials wish to examine policy responses that could positively affect prescription drug prices, many pro-patient, pro-taxpayer options exist. These include reforms to the 340B program, a regulatory climate conducive to value-based purchasing, stronger, more permanent tax-law provisions for R&D costs and rebate reform that prioritize innovation. With this Committee’s leadership and direction, Washington lawmakers can play a vital role in ensuring that patients and taxpayers come first in the discussions over such options.
We hope you stand with the patients and taxpayers of Washington and oppose SB 5532. Thank you for your time and consideration of NTU’s comments, please reach out should you have any questions.
Vice President of State Affairs
Director of State Affairs