No Price Controls!

— A Note From Americans For Tax Reform —

Thanks to American medical innovation, we will likely have several Coronavirus vaccines by the end of the year. This good news proves free market policies that encourage competition, choice, and access work.

Unfortunately, the Department of Health and Human Services is advancing a “most favored nation” (MFN) order that would impose foreign price controls on American medicines.

The MFN would create a government “International Pricing Index” (IPI) on the drugs used by Seniors in Medicare Part D and Part B, which would arbitrarily tie the prices American patients pay to the prices set by socialist, foreign countries.

This plan would cripple American innovation and delay access to new treatments and cures at a time when we need them most. It would impose socialist healthcare policies like the ones being pushed by far-left politicians like Nancy Pelosi, Bernie Sanders, and Alexandria Ocasio-Cortez.

We should reject the effort to impose socialized medicine through the most favored nation order.

American medical innovation is leading to the creation of COVID-19 cures

Thanks to American medical innovation, it is likely we will have tens of millions of doses of a COVID-19 vaccine before the end of the year. Since the pandemic began, manufacturers have worked around the clock to develop dozens of Coronavirus vaccine candidates. This has resulted in high quality vaccines being developed at the fastest rate ever.

A vaccine jointly developed by Pfizer and BioNTech, a German pharmaceutical firm, has reported 90 percent effectiveness in combating COVID-19 based on the first interim efficacy analysis.

Similarly, a vaccine developed by Moderna reported 95 percent effectiveness in its first interim analysis. These results are extremely strong – a typical flu vaccine is 40 to 60 percent effective.

This good news is only possible because the U.S. is the best in the world when it comes to developing innovative, lifesaving and life preserving medicines.

Imposing a most favored nation drug pricing plan would threaten this innovation.

The MFN would reduce access to new cures

Adopting foreign price controls will create the same problems that foreign healthcare systems suffer from – there will be less medical innovation leading to fewer cures and healthcare shortages for American patients.

The Trump administration has wisely recognized the damage that adopting foreign pricing would have on American innovation, as noted in a report released in February 2018 by the president’s Council of Economic Advisors:

“If the United States had adopted the centralized drug pricing policy in other developed nations twenty years ago, then the world may not have highly valuable treatments for diseases that required significant investment.”

This is not hypothetical. Of the 290 new medical substances that were launched worldwide between 2011 and 2018, the U.S. had access to 90 percent. By contrast, the United Kingdom had 60 percent of medicines, Japan had 50 percent, and Canada had just 44 percent. Studies have also found that price controls used in Europe delay new drugs coming to market by an average of 14 months.

The fact is, developing new medicines is a complex, time consuming process. A manufacturer must invest a substantial amount in research and development. In addition to these costs, the clinical development and approval times average 90.3 months for a pharmaceutical drug and 97.3 months for a biologic. Given this extensive process, there is a clear linkage between the ability of manufacturers to recoup their investment and their willingness to innovate.

The MFN will threaten millions of high-paying jobs

Not only will the MFN harm American patients in the form of fewer treatments and worse health outcomes, it will also harm the economy because of a decline in American research and development.

This medical innovation is enormously beneficial to American workers and to the economy. Manufacturers invest over $100 billion in the U.S. economy every year, directly supporting over 800,000 jobs.

When indirect jobs are included, this innovation supports 4 million jobs and $1.1 trillion in total economic impact. Pharmaceutical jobs are also high paying – the average compensation is over $126,000 – more than double the $60,000 average compensation in the U.S.

The MFN would do nothing to stop foreign freeloading

The most favored nation order would do nothing to address the root cause of high drug costs – foreign price controls which artificially lower the cost of prescription drugs overseas.

Because of these foreign price controls, the prices paid by other countries for pharmaceuticals is less than what is needed to incentivize the development of innovative new medicines. There is no negotiation and foreign governments often force innovators to accept lower prices in a “take-it-or-leave it” proposition. This results in reduced or restricted access to new medicines and higher prices for those medicines that enter the market.

Rather than fighting foreign price controls, the most favored nation plan would surrender to foreign freeloading by basing U.S. prices off the prices of these countries.

The MFN would move us closer to socialized healthcare

The most favored nation order would set the stage for a full government takeover of the healthcare system.

Progressive politicians are pushing price controls as the first step to expand government control over the free market.

Eventually, this will result socialist healthcare, where we have price controls on the entire healthcare system. This plan, which the left misleadingly calls “Medicare for All,” would reduce access to care and create healthcare shortages.

This has already occurred in other nations that have socialized healthcare, like Canada and the United Kingdom. In the UK for instance, there was a shortage of 10,000 doctors and 43,000 nurses in 2019, with 9 in 10 managers in the National Health Service saying that too few doctors and nurses presented a danger to patients. At any one time, 4.5 million patients were waiting for hospitalization.

The most favored nation plan has already been proposed in legislation released by Bernie Sanders that would implement other key parts of Medicare for All.

The proposal was also included in the Nancy Pelosi-AOC proposal to force manufacturers to accept government set prices or face a 95 percent excise tax.

The Pelosi-AOC proposal could prevent 100 lifesaving and life-preserving medicines from being created over the next decade, according to the Council of Economic Advisers.

It could also threaten access to existing cures as the 95 percent excise tax could hit up to 250 treatments including cures for leukemia, cancer, MS, schizophrenia, bipolar, epilepsy, lung disease, high blood pressure, diabetes, HIV/AIDS, and hepatitis C.

Conservatives Oppose the MFN

In addition to being bad policy, there is strong opposition to the MFN. 80 free market, conservative, and libertarian groups and activists released a coalition letter urging President Trump to withdraw this proposal.

Signatories of the coalition letter include representatives from prominent national organizations as well as almost 30 states.

 

Coalition Letter