State Legislators: Oppose Anti-Free Market Pharmaceutical Price Control Proposals

Dear Members of Congress:

ALEC Action[1] is pleased to present the undersigned members of the American Legislative Exchange Council (ALEC) who oppose plans and legislation that seek to control and limit pharmaceutical prices artificially. Current proposals being considered in Congress and by the U.S. Department of Health and Human Services (HHS) will have unacceptable ramifications, most alarmingly, a significant drop in pharmaceutical companies’ resources which will inevitably lead to less investment in life-saving and life-enhancing research and development. These ideas are wholly inconsistent with ALEC’s free market, limited government principles and will ultimately harm patients both in this country and abroad.

Plans to set drug prices are metastasizing rapidly in Washington, DC. The current International Pricing Index (IPI) proposal being advanced by HHS would tie prices for medicines in the U.S. to other countries’ price ceilings. Other proposals from Congress would use international reference pricing to accomplish similar goals.

An additional idea under consideration would permit prescription drug importation if drugs from foreign countries could be procured at substantial discounts. HHS estimates that this proposal would only result in a 1 percent savings for American pharmaceutical consumers and the federal government cannot ensure that the drugs entering the country would be safe and effective.

These attempts at health care cost-cutting are economically flawed and will lead to a reduction in lifesaving innovation at a time when the pharmaceutical industry is poised to discover treatments and cures for some of our more deadly and debilitating diseases. To constrain resources now will quite literally cost lives. According to the Global Pharmaceutical Policy Model, U.S. adoption of European price controls would lead to .7 years lower longevity for Americans and Europeans.

U.S. patients may lose access to new treatments. Americans currently enjoy access to 89 percent of new medicines. This contrasts sharply with countries that have enacted price controls such as Germany, Switzerland, the Netherlands and Singapore where access to new medications is 62 percent, 56 percent, 48 percent and 29 percent respectively.

These ideas are well-meaning but misguided attempts to address a real problem.

America often pays far more than the rest of the world for medicines – up to six times more. According to Reforming Biopharmaceutical Pricing at Home and Abroad, a February 2018 report released by the White House Council on Economic Advisors:

“Among members of the Organization for Economic Co-operation and Development (OECD) … Americans pay more than 70 percent of patented biopharmaceutical profits, despite the fact that the United States accounts for only 34 percent of OECD GDP at Purchasing Power Parity (PPP). In short, pharmaceutical innovators—and foreign governments—across the world rely on America’s patients and taxpayers to finance critical research and development.”

And because Americans bear a disproportionate share of the drug cost burden, price controls advanced by the United States will have an outsize and disruptive impact on pharmaceutical industry revenues with dire health consequences for our nation and the rest of the world.

Pharmaceutical companies take on substantial financial risk with the creation of each potentially lifesaving product. The average drug takes 11-14 years to develop at a cost of between $1 and $2.6 billion. Fewer than one of 12 of these drugs ever make it to market.

The United States leads the world in new drug patents because of a combination of strong intellectual property protections and a robust pharmaceutical industry that supports four million American jobs and invests heavily in research and development. American leadership and jobs would evaporate along with drug company revenues.

However, the most unfortunate casualties of a rush for our government to import ill-advised price controls will be those hoping for lifesaving cures that never come because research and development dollars disappear.

Rather than accelerating a race to the bottom, the White House should exert its influence to encourage other developed nations to shoulder more of the responsibility for health innovation. These countries can and should increase the prices they pay to better reflect market value. The 2015 Congressional Trade Priorities and Accountability Act, for which ALEC has supporting model policy here, mandates the negotiation of trade frameworks that “achieve the elimination of government measures such as price controls and reference pricing which deny full market access for United States products.” Prioritizing the negotiation of trade agreements that make the lifting of pharmaceutical price controls would be a good place to start.

Science is on the cusp of developing cures and treatments for a host of human maladies from cancer to Alzheimer’s. Now is not the time to endanger the financial resources needed to create lifesaving, medical innovation.

Respectfully yours,

Sign the Letter Here

[1] ALEC Action is the official advocacy organization 501(c)(4) affiliated to the American Legislative Exchange Council (ALEC) 501(c)(3).