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Posts Tagged ‘Price Controls’
July 22nd, 2019 at 1:09 pm
Budget Negotiations: CFIF Opposes Use of Drug Price Controls via “Mandatory Inflation Rebates”
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In ongoing negotiations, it’s reported that some are proposing to employ destructive drug price controls as a mechanism to reach a budget agreement.  For multiple reasons that CFIF has highlighted, that poses a potentially catastrophic idea.

Specifically, it appears that debt ceiling negotiations may include a destructive proposal to reduce federal spending levels by targeting $115 billion from Medicare, which would derive largely from alleged “Medicare savings” through instituting a government-imposed mandatory “inflation rebates.”  As we’ve explained, inflation rebate proposals work by penalizing drug innovators with higher taxes whenever their products exceed an arbitrary inflation mark.  Currently, Medicare Part D’s structure works by employing market-based competition to mitigate drug costs via privately-negotiated rebates, meaning that no specific “price” reliably represents that drug’s underlying price.  Accordingly, the proposal would inherently undermine privately-negotiated Part D plan rebates, which the Congressional Budget Office (CBO) has said “appear to make the net prices approach the lowest prices obtained in the private sector.”  Indeed, as the Altarum Institute has highlighted, those Part D plans currently achieve greater brand medicine rebates than private insurers.

Critically, it must also be noted that inflation rebate proposals would violate non-interference clauses that facilitate competition among Part D plans, which provide a critical part of Part D’s success in mitigating costs since its inception.  They would also arbitrarily apply to new pharmaceuticals while bypassing generic brands, which now constitute approximately 90% of Part D prescriptions.  The proposal would also inescapably weaken incentives on the part of Part D plan sponsors to negotiate with drug manufacturers and minimize drug spending under a regime of statutorily-imposed rebates, thereby setting a negative precedent for those sponsors.  It also bears emphasis that private-sector limits on drug cost increases already exist via “price protection rebates” that Pharmacy Benefit Managers (PBMs) negotiate with manufacturers.

Accordingly, imposing price controls in Medicare Part D would fundamentally undermine its entire market-based model, which would in turn reduce research and development and slow progress toward new and improved medicines.

Adding insult to injury, such a proposal would constitute a raid on Medicare for the benefit of other government spending pork.  During this era of budgetary waste, the last thing that Congress should consider doing is sacrificing Medicare, particularly when affordability and access to pharmaceutical innovations remains such a top public priority.  Budgetary discipline and access to medicines remains a priority of the highest order, but market-oriented solutions, not destructive gimmicks, offer the optimal solution.  Any proposal to target Medicare Part D for mandatory inflation rebates has not been subjected to full review, committee research, hearings or debate.

American citizens, particularly seniors, should not be subjected to that danger.

 

April 4th, 2019 at 10:16 am
CFIF Urges Opposition to the Importation of Foreign Price Controls
ALEXANDRIA, VA — In November of last year, the Center for Individual Freedom (“CFIF”) joined with 57 free-market organizations and individuals on a coalition letter opposing the importation of foreign price controls on prescription drugs, a proposal currently under consideration at the U.S. Department of Health and Human Services (“HHS”).  In a coalition video released last week, several leading free-market voices, including CFIF, spoke out once again against the perils of imposing foreign price controls.

Unfortunately, recently introduced legislation by Senator Rick Scott (R-FL) entirely ignores that overwhelming opposition from conservatives and the free-market community and seeks to import foreign price controls into the U.S.  This legislation, known as the “Transparent Drug Pricing Act” (S.977), would fix U.S. drug prices to the lowest cost of the same drugs sold in five other countries: Canada, France, the United Kingdom, Japan and Germany.

It is CFIF’s strong belief that importing socialist price controls in an effort to lower drug prices is the wrong approach and will reduce access to medicines, kill innovation and harm patients.  Therefore, CFIF urges Senators not to cosponsor or vote in favor of this harmful legislation.

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February 14th, 2019 at 5:08 pm
Want to Address Drug Costs? Avoid Price Controls, Eliminate PBMs and Don’t Weaken Patents
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In an excellent piece in today’s Wall Street Journal, Scott Atlas of Stanford University highlights how Americans enjoy far greater access to new lifesaving drugs than patients in Europe and elsewhere, and how the movement to impose government price controls would only restrict access to new drugs and degrade Americans’ health outcomes, as we at CFIF have been emphasizing:

America has superior treatment results for virtually all serious diseases reliant on drug treatment, including cancer, heart disease, stroke, high blood pressure and diabetes.  Price controls would jeopardize that advantage…

Pegging drug prices to those of foreign countries, as both Bernie Sanders and Donald Trump have proposed, would ultimately lead to the same consequences Europeans endure – reduced access to critical drugs and worse outcomes, including more deaths from disease.”

Mr. Atlas also notes how the Trump Administration has taken positive steps toward actually reducing drug prices, by targeting rebates received by pharmacy-benefit managers (PBMs) from drug manufacturers:

The Trump Administration has announced a proposal to do away with rebates paid by drug manufacturers to pharmacy-benefit managers, replacing them with discounts to beneficiaries at the point of sale.  PBMs are middlemen that control ‘formularies,’ the lists of drugs covered by a plan.  Rebates from drug companies to PBMs are payments for influence – either to position a drug on the formulary as ‘exclusive’ or to give it preferred status over competitors.

PBMs act counter to patient interest while aggravating the lack of price transparency.   These complex behind-the-scenes payments – $179 billion in 2016 – reward inflated list prices, on which patient premiums are often based.  This prevents patients from taking account of price…  Go-betweens like PBMs should be eliminated.”

Finally, and just as critically, Mr. Atlas adds that weakening patent and intellectual property (IP) rights would constitute a particularly destructive course:

Drugs are the most significant reason for the past half-century’s unprecedented gains against deadly disease.  But policies that aim to reduce drug prices – price regulation and weaker patent protection – are also associated with delayed availability, less innovation, and limited access.”

Mr. Atlas delves into statistics showing the enormous advantage that Americans enjoy in terms of new drugs and health outcomes, and his piece is well worth the full read.  Hopefully policymakers at all levels of government are listening.

January 15th, 2019 at 11:31 am
Drug Price Controls Would Kill Innovation
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We at CFIF have been emphasizing the threat posed by new drug price controls inexplicably contemplated by the Department of Health and Human Services (HHS).  In December, CFIF filed formal Comment opposing that ill-advised proposal, and hopefully wiser minds will prevail before the damage is done.  In similar vein, The Wall Street Journal ran a welcome commentary entitled “The Drug Price-Control Threat” on January 8 of this year, and a followup letter from reader Bruce Zessar of Highland Park, Illinois in today’s edition offers a personal, real-world illustration of what could be lost:

Insulin isn’t the same now as when it was discovered a century ago.  My wife is a Type I diabetic, diagnosed when she was 14 in 1980.  She has been a beneficiary of the tremendous advances in insulin therapy during the last four decades, including Lantus and Humalog.  When we got married in 1990, she had to live on a rigid schedule, eating lunch at, say, noon, and then dinner by 6:30-7:00 every day.  That’s becaue of the way prior insulin therapies worked in managing blood sugar.  With the invention of Lantus and Humalog, she can now live a normal life like everyone else.

Insulin is a shining example of why drugs deserve the utmost patent protection to encourage continual innovation.”

Price controls have never worked in any nation that has tried them, or with any commodity.   Few, if any, products are as important to our lives as America’s world-leading pharmaceutical sector, and we mustn’t let the price control scheme contemplated by the HHS kill the goose that continues to lay golden eggs.

August 6th, 2012 at 5:33 pm
The Huge Injustices of Tiny Cartels
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There’s no exercise of government power quite as nauseating when seen up close as a relatively small industry’s attempts to team up with government and either (A) shake down or (B) close down a rival who has built a better mousetrap. In his book “Government’s End: Why Washington Stopped Working” (one of the best political reads of the past few decades, by the way) — a volume dedicated to this trend — Jonathan Rauch describes how Washington D.C. bike messengers, for instance, lobbied heavily against the use of fax machines in the nation’s capital, for no other reason than that they were bad for business (a stand reminiscent of Frederic Bastiat’s famous satirical letter to the French Parliament in which it was claimed that candlemakers were suffering unfair competition from the sun).

This trend is rearing its ugly head again in Washington D.C., where city government is trying to crack down on Uber, one of the great innovations of the smart phone era. Uber is a private car service operating in a handful of major cities that allows you to instantly request a sedan from your smart phone, have it arrive in minutes, and then have all of the billing (including the tip) taken care of straight from your credit card. Uber eliminates all of the inconveniences of the taxi experience (your humble correspondent, for instance, recently waited 45 minutes for a cab in Silicon Valley after being told by dispatchers that it was five minutes away) and usually does so at a cheaper price. And of course, D.C. can’t have that! From the Daily Caller:

Members of the Washington, D.C. City Council haven’t given up on their efforts to bring the efficient and reliable luxury sedan-on-call service, Uber, under the authority of the company’s competitors in the taxicab industry.

Council members previously tried to establish a price floor for the company. More recently, at a July 10 meeting, a number of City Council members voted to bring the sedan service under the authority of the D.C. Taxicab Commission, a regulatory body strongly influenced by the taxi industry.

“I was opposed to them not being regulated, period,” councilman and former D.C. Mayor Marion Barry told The Daily Caller. “This was a compromise. I think if it’s not a regulated service, it really has an impact on the D.C. taxi industry.”

Of course it has an impact! That’s generally what happens when someone decides to build a company that can deliver a better product at a lower price.

Let’s hope Uber can resist the legislative strong-arming. At least they have this going for them: there are few inadvertent blessings as sweet as having Marion Barry be your chief antagonist.