July 19, 2019

The Honorable Mitch McConnell 
United States Senate Majority Leader
317 Russell Senate Office Building
Washington, D.C.  20510

Dear Leader McConnell:

On behalf of the Center for Individual Freedom (hereinafter “CFIF”) and over 300,000 supporters and activists across the nation, I write our profound concern and opposition regarding any proposal to employ destructive drug price controls as a mechanism to reach a budget agreement. 

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 government-imposed mandatory “inflation rebates.”  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. 

Thank you very much for your attention to this important matter, and please contact me at your convenience with any questions or comments. 

Sincerely, 

/s/

Timothy Lee 
Senior Vice President of Legal and Public Affairs 

cc: United States Senators