July 10, 2023 

Dear Senators:   

On behalf of over 300,000 supporters and activists across the nation, the Center for Individual Freedom (CFIF) writes in response to the July 3, 2023 request for comments by Senate Committee on Health, Education, Labor and Pensions (HELP).   

Specifically, we wish to express our strongest opposition to the Chair’s staff request for “feedback on policy to require that all BARDA and CDC-supported products be sold to the Federal Government on or in the U.S. commercial market at the lowest price among G7 countries (Canada, France, Germany, Italy, Japan, and the United Kingdom) and at a reasonable price.”   

That proposed policy effectively constitutes a back-door attempt to impose new price controls, which will only reduce pharmaceutical research and development and ultimately stifle innovation and availability of lifesaving drugs to American consumers.  That’s precisely why a coalition of academic research institutions, venture capitalists and private-sector companies bluntly stated that, “We’ve been down this road before, and it was a disaster” in a letter to President Joe Biden dated June 30, 2023.   

As that letter highlighted, the National Institutes for Health (NIH) itself rescinded a previous “reasonable pricing” clause due to its destructive effects:   

An extensive review of this matter over the past year indicated that the pricing clause has driven industry away from potentially beneficial scientific collaborations with PHS (public health service) scientists without providing an offsetting benefit to the public.  Eliminating the clause will promote research that can enhance the health of the American people…   

The clause attempts to address the rare breakthrough product at the expense of a more open research environment and more vigorous scientific collaborations.  One has to have a product to price before one can worry about how to price it, and this clause is a restraint on the new product development that the public identified as an important return on their research investment.   

More broadly, simple laws of economics dictate the inevitable futility and danger of price controls.  Regardless of the good or service targeted, regardless of era and regardless of where they’re attempted, price controls simply do not work.  With regard to drug price controls specifically, the unavoidable consequence in nations that impose them is dramatically reduced access to new lifesaving and life-improving treatments.   

To illustrate that truth through the experience of other G7 nations specifically named in this Committee’s request for comments, out of 270 new medicines introduced in the U.S. since 2011, Canadians can only access 52% of them, Germans just 67%, the British 64%, the French 53% and the Japanese 48%.  The artificial price regulations contemplated by the Chair’s staff would immediately threaten that superior U.S. pharmaceutical access.   

It’s also important to highlight that pharmaceutical price control efforts remain unpopular among American consumers and voters.  A national survey conducted in partnership with CFIF by Public Opinion Strategies measured the health care priorities of voters nationally and in 12 key swing states.  It found that “voters, across party, overwhelmingly prefer the role of the federal government to be that of providing oversight and incentives to health care providers, prescription drug companies and health insurers to encourage competition to lower prices in the health care system (70%) rather than having the federal government set prices and determine what services and medicines are covered by private health plans (30%).”   

That reflects an understanding of the realities of the pharmaceutical marketplace.  Namely, very few potential new drugs ever enter the consumer market, due to astronomical research and development costs, lengthy government safety reviews, laboratory tests of effectiveness, potential product liability lawsuits by plaintiffs’ attorneys, patent protection limitations and other bureaucratic demands.  Artificial price regulation makes it even more difficult to recover the costs of new medicines and R & D, so fewer potential new drugs would be pursued due to cost ineffectiveness.   

Even the United Nations World Health Organization has recognized how price regulation prevents new drugs from coming to market, ultimately punishing consumers:   

Every time one country demands a lower price, it leads to a lower price reference used by other countries.  Such price controls, combined with the threat of market lockout or intellectual property infringement, prevent drug companies from charging market rates for their products, while delaying the availability of new cures to patients living in countries implementing those policies.   

Astonishingly, America accounts for nearlytwo-thirds of all new pharmaceuticals introduced worldwide, precisely because of our more market-oriented pharmaceutical industry.  Imposing price control mechanisms would jeopardize that leadership position and discourage nearly $1 trillion in U.S. pharmaceutical investment and ultimately punish consumers.  That’s far too high a price to pay.   

Finally, CFIF wishes to address the false suggestion that federal funding toward pharmaceutical research justifies greater government price controls, falsely claiming that pharmaceutical innovators somehow enjoy a free ride at taxpayer expense.    

The truth is very different.  Private funding for research and development actually dwarfs public funding.  According to the NIH itself, private sector R&D amounted to five times NIH funding in 2015 alone, $150 billion to $30 billion.  In 2018, as another example, the NIH spent $3 billion on clinical trials involving new or existing drugs, compared to $102 billion in R&D by the U.S. biopharmaceutical industry.  Indeed, the pharmaceutical industry stands as the single largest source of business R&D funding in the U.S., accounting for 17.6% of all U.S. business R&D.  The next-closest counterpart is the software sector at 9.1%, with the automobile industry at 5.9% and the aerospace industry at 4.1%.   

Accordingly, it’s simply false to allege that the private pharmaceutical sector somehow enjoys some sort of free ride.  Pharmaceutical innovation demands billions of dollars in sunk costs of investment, not to mention potential product liability lawsuits for any errors, and Congress must ensure that those costs and risks will be fairly and sufficiently rewarded.  National policy must provide innovators and investors the incentives to create pharmaceuticals that save millions and even billions of lives worldwide.   

Simply stated, the “reasonable pricing” idea is one that has already been tried and failed, and future iterations would meet the same fate.  Ultimately, American consumers would pay the price.  We must safeguard America’s world-leading legacy of lifesaving drug innovation, not weaken it.  Thank you very much for your attention to this important matter, and please contact me at your convenience with any questions or comments.