CEI Joins 25 Organizations to Oppose Misguided Medicare Part D Rebate Proposals

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Dear Senators and Representatives:

In the final months of the Obama Administration, the White House and Congress will engage in another round of negotiations regarding government spending. The President and his allies will likely continue to support a proposal to raid the Medicare prescription drug benefit program to pay for high spending levels in other areas of government. On behalf of the millions of Americans that our organizations represent, we encourage you to oppose misguided Medicare Part D rebate proposals.

Although Medicare Part D is far from perfect, and many of the signatories opposed the program's creation, the program has successfully used market mechanisms such as competition and choice to improve access and control costs. Through negotiations between insurers and pharmaceutical companies, seniors can purchase drugs at lower prices, often as much as 30 percent off the sticker price of brand-name drugs. As a result, Part D has cost taxpayers 45 percent less than originally estimated in the first decade following enactment, an anomaly among government programs.

The President proposed in his 2017 budget request to repeal the non-interference provision at the heart of this successful competitive market in favor of government price-setting. The budget would also require pharmaceutical companies to “rebate” up to 40 percent of their drug sales back to Medicare. This is not a “rebate” in any true sense of the word. Rather, this is an attempt to force drug makers to sell to insurance companies at a loss, as the government does with the poorly-performing Medicaid program. Government forcing companies to turn money over to the Treasury is not a rebate, it’s a tax.

This tax will have a significant impact on the market. Drug companies will respond by embedding the cost of the tax in the price of their drugs, driving up the total cost of insurance. Increasing the price of insurance—due to direct government involvement—is a de facto tax increase on America’s seniors. We urge you to oppose any attempts to effectively tax the Medicare Part D program for more reckless spending. This is not savings, nor is it entitlement reform—it’s more accurately called a tax hike.

Brent Gardner, Vice President of Government Affairs
Americans for Prosperity

Jim Martin, Chairman
60 Plus Association

Phil Kerpen, President
American Commitment

Dan Schneider, Executive Director
American Conservative Union

Sean Noble, President
American Encore

Dee Stewart, President
Americans for a Balanced Budget

Coley Jackson, President
Americans for Competitive Enterprise

Peter J. Thomas, Chairman
Americans for Constitutional Liberty

Andrew F. Quinlan, President
Center for Freedom and Prosperity

Jeffrey Mazzella, President
Center for Individual Freedom

Tom Brinkman Jr., Chairman
Coalition Opposed to Additional Spending and Taxes (COAST)

Gregory Conko, Executive Director
Competitive Enterprise Institute

Dan Caldwell, Vice President for Legislative and Political Action
Concerned Veterans for America

David Bozell, President

George Landrith, President
Frontiers of Freedom

Joseph Bast, President and CEO
The Heartland Institute

Sabrina Schaeffer, Executive Director
Independent Women's Forum

Heather R. Higgins, President and CEO
Independent Women’s Voice

Seton Motley, President
Less Government

Colin A. Hanna, President
Let Freedom Ring

Daniel Garza, Executive Director
The LIBRE Initiative

Harry C. Alford, President/CEO
National Black Chamber of Commerce

Amy Ridenour, Chairman
National Center for Public Policy Research

Pete Sepp, President
National Taxpayers Union

William Whipple III, President
Secure America's Future Economy

David Williams, President
Taxpayers Protection Alliance