HR 3, Elijah E. Cummings’ Lower Drug Costs Act, was reintroduced in the House of Representatives on Thursday April 22nd. Similar legislation, originally titled “Lower Drugs Costs Act”, was introduced in September 2019 and passed House on December 12, 2019 by 230 votes to 192. It was a bad bill then and a worse bill today, because at least in 2019 there were cooler minds in the Senate who acted as James Madison had imagined, a “necessary fence” to survive to the “inconstancy and passion” “which can be found in the house. Unfortunately, depending on that fence, left-wing Democrats in control of both houses of Congress and the White House are risky. This cruel legislation comes with price controls and a drug excise tax that seniors and the general population would pay in higher costs, less innovative drugs would reach the market, and the United States would lose its leadership position in biopharmaceutical research and development.
The U.S. pharmaceutical market is already heavily price-controlled by government drug benefit programs, including Medicaid rebates, the 340B drug rebate program, the 70 percent discount in Medicare Part D coverage gap, and VA drug benefits. These price-driven programs have distorted the US pharmaceutical market, and just like a balloon, the other side increases when one side is pushed down. If the system is pushed too far, it will ultimately break and biopharmaceutical research in the US will be funded far less.
While the law initially focuses on Medicare Part D, it would also allow private institutions such as commercial health insurers, hospitals, doctors, and other health care providers to take advantage of the price controls. So expect the biopharmaceutical “balloon” to break. The private sector has created the financial basis for research and development. HR 3 determinations will result in far less innovative drugs going forward, 100 in the next decade, as discussed in a visit to Doug Badger published by the Heritage Foundation on April 17.
Allegedly, the “savings” on drugs that HR 3 collects through price controls and excise taxes would be reinvested in the National Institutes of Health, the Food and Drug Administration and used to fight the opioid crisis, but not wagered on it. This is a Congress that has already spent a whopping $ 5.7 trillion on COVID containment since March 2020, much of it having little to do with the pandemic like funding and running the Kennedy Center, its Climate change programs have been closed. and support from Voice of America. Now the far-left Democrats want to spend more than $ 2.25 trillion on the president’s proposed infrastructure package, the American Jobs Plan, with large sums going to be used for things unrelated to roads or bridges, like these Add $ 400 billion to home and community-based services and long-term care facilities or increase union membership.
HR 3 begins with “Title 1 – Price Reduction through Fair Negotiation of Drug Prices”, which implies that Medicare D, the voluntary benefit for prescription drugs, does not result in a negative. In Medicare Part D, however, negotiations are already taking place between drug manufacturers, insurers, pharmacy performance managers (PBMs) and pharmacies. Medicare Part D plans compete for price, value, and options so seniors can choose the plan that best suits their needs.
The legislation would allow the Minister of Health and Human Services to negotiate a “maximum fair price” for a Medicare drug plan year, whatever that means. Most likely, the Department of Health and Human Services (HHS) will set a price very close to or at the level of six countries as legislation allows the use of an Average International Market Price (AIM). The HHS secretary will study a select group of drugs that are estimated to have the highest net spending in the US and use the AIM to determine the maximum fair price for most drugs. This would be amusing if it weren’t so destructive, as the “market price” recorded in these countries is due to some form of price control due to government-run health systems. They are leveraging US-funded research, as discussed in two reports from the business advisor dated February 2018 and February 2020.
If a pharmaceutical company does not accept the government’s “negotiated price” during the “voluntary negotiation period”, they will be fined up to 95 percent excise tax based on the previous year’s sales. Compliance is not “voluntary”. Expect private investment in biopharmaceutical research to be greatly reduced and shifted to other government-favored industries.
If it were to become law, HR 3 would set the US on the path that Europeans embarked on not so long ago. In 1990, US $ 16.7 billion was invested in biopharmaceutical research, with European countries contributing 59.2 percent and the US 40.8 percent. When Europeans introduced price controls in the 1980s and 1990s, drug investment shifted to the US. By 2017, those percentages had switched sides. Of the $ 95.7 billion invested in biopharmaceutical research, the US contributed 58.3 percent and Europe 41.7 percent.
Because of the remaining private health care system, Americans currently have access to 89 percent of breakthrough drugs, while citizens in France, Germany and Switzerland only have access to 48, 62 and 48 percent of new drugs, respectively. And if someone has cancer, it’s better to be in the US, where citizens have access to 96 percent of the new oncology drugs, while citizens in France, Germany and Switzerland have access to 66, 73 and 62 percent of the new cancer drugs, respectively to have. That will change when HR 3 becomes law. There will be fewer innovative drugs and US patients will likely be more dependent on countries like communist China, which is fast becoming a powerhouse in research.
Citizens Against Government Waste (CAGW) agree that reforms can be made that would bring market competition back to Medicare Part D. A reform plan offered by the American Act Forum (AAF) would restructure the current Part-D benefits by placing greater financial risk for high-cost beneficiaries for both insurers and drug manufacturers and protecting seniors from catastrophic expenses with an out-of-pocket cap. Instead of taking advantage of the current standard Medicare Part D benefit, which only pays 5 percent of the coverage gap or “donut hole” from the plan (an insurer or PBM) and pharmaceutical companies pay a 70 percent discount (a price control ) Under the AAF plan, the plan would pay 75 percent of the cost from the deductible to the disaster stage, and the beneficiary would pay 25 percent, with the maximum out-of-pocket cost. In the disastrous phase, 71 percent would be paid for by the private plan, 20 percent by Medicare, and 9 percent by the drug company. CAGW would prefer the manufacturer to pay nothing during the disastrous period as this would encourage manufacturers to have a higher list price to cover the cost, which distorts the market. In either case, greater risk to the plans will lead to more robust negotiations and generic use.
Congress also needs to assess the damage it has done by introducing government price controls to a large segment of the pharmaceutical market that has skewed aggregate prices and find real market-driven ways to reduce costs.
Finally, the Administration and Congress need to make better trade deals when economically advanced countries, which can and should contribute more to biopharmaceutical research, do so and reduce the burden on American taxpayers and consumers. This would not only improve the situation in the US market, it would also improve private investment in these countries and help expand their biopharmaceutical research to create more choice and more competition, which will lower costs and benefit the whole world would.