CEI Joins Coalition Letter Opposed to Most Favored Nation Drug Pricing Final Rule

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Introduction

On behalf of the undersigned federal and state-based organizations, we write to express our opposition to the interim final rule to implement the Most Favored Nation (MFN) Model under section 1115A of the Social Security Act. We request you withdraw the rule.

The rule forces physicians, patients, and providers into a mandatory demonstration under the Obamacare Center for Medicare and Medicaid Innovation (CMMI) and ties the prices paid for medicines in Medicare Part B to the prices in foreign countries with socialized health care systems.

The proposal imports foreign price controls into America’s healthcare system. This will harm medical innovation and the development of new medicines. It will threaten high-paying American manufacturing jobs and do nothing to stop foreign freeloading. Instead, it will move the United States closer to a system of government-controlled healthcare.

The need for free market policies that promote American medical innovation is clear. Manufacturers have developed several highly effective COVID-19 vaccines at the fastest rate ever. This good news is only possible because the U.S. leads the world when it comes to developing innovative, lifesaving and life enhancing medicines.

The MFN would do nothing to stop foreign freeloading

One of the goals of the MFN is to “end foreign freeloading,” where foreign countries benefit from American innovation and the development of cures but do nothing to pay for the extensive investments required for the next generation of cures.

Supporters of the MFN have claimed the concept is a free-market proposal that will incentivize manufacturers to negotiate better deals. However, this theory is based on the flawed assumption that American manufacturers were not fighting as hard as they could against foreign price controls in past years.

Rather than fighting price controls that distort markets and impede innovation, the MFN would surrender to foreign freeloading by setting U.S. prices based on the prices of other countries.

Foreign countries pay less for medicines because they utilize price controls. There is little or no negotiation between foreign government and manufacturers which often forces innovators to accept lower prices in a “take-it-or-leave it” proposition.

While this artificially lowers the cost of prescription drugs overseas, it also results in reduced or restricted access to new medicines and higher prices for medicines when they enter the market.

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 resulting in fewer new treatments and cures leading to healthcare shortages for American patients.

Developing new medicines requires a substantial investment of time and costs. In all, it costs an average of $2.6 billion to successfully develop, test, and bring a new prescription drug to market, according to a study by Tufts Center for the Study of Drug Development. In addition to being costly, the process of drug development is also risky –just 12 percent of drugs entering clinical development become approved, based on Tufts’ analysis of 1,442 experimental drugs.

Patients in many of the countries referenced by the MFN have access to far fewer new medicines than patients in America.

According to a study by the Galen Institute, patients in the U.S. had access to nearly 90 percent of new medical substances launched between 2011 and 2018. By contrast, other developed countries had a fraction of these new cures. Patients in the United Kingdom had 60 percent of new substances, Japan had 50 percent, Canada had 44 percent, and Spain had 14 percent.

The fact is, if the U.S. had the same price controls utilized by foreign countries, we would have many fewer innovative cures available to patients today, as noted in a February 2018 report released by the president’s Council of Economic Advisors. As the report stated:

 “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.”

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 also will threaten America’s position as a leader of high-paying pharmaceutical manufacturing jobs.

Medical innovation is a key driver of job creation and the American economy. Every year, manufacturers invest more than $100 billion in the U.S. economy, which directly supported more than 800,000 jobs as of December 2017. When accounting for indirect and induced jobs, this innovation supports more than four million jobs across the country.

This is a substantial contributor to the U.S. economy – creating an estimated $1.1 trillion in annual economic output. For context, national GDP in the U.S. at the end of 2017 was $19.7 trillion, according to the Bureau of Economic Analysis.

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.

These high-paying jobs can be found across the country. For instance, in Florida there are an estimated 25,000 pharmaceutical manufacturing jobs and the industry directly and indirectly supports more than 130,000 jobs. In Pennsylvania, there are over 46,000 manufacturing jobs and more than 250,000 jobs directly or indirectly supported by the industry.

Politicians on both sides of the aisle routinely call for the creation of more high-paying manufacturing jobs. We should be pursuing policies that help create more of these jobs, rather than policies that threaten existing jobs.

The MFN will move America one step closer to a government run healthcare system

The MFN would move the U.S. closer towards socialized medicine by placing price controls on Medicare Part B.

Progressives are pushing proposals to expand the power that government has over the healthcare system like “Medicare for All” and the public option. These proposals also heavily rely on price controls on the healthcare system.

Similar policies to the MFN can be found in the proposals pushed by progressives in Congress. For instance, the most favored nation plan can be found in Medicare for All legislation proposed by Vermont Senator Bernie Sanders. A variant of this proposal was also included in House Speaker Nancy Pelosi’s H.R. 3, legislation that forced manufacturers to accept government set prices or face a 95 percent excise tax.

If the left had their way, government would control the entire healthcare system, an outcome that would also result in significant tax and spending increases and the loss of existing coverage for millions and millions of Americans.

It would lead to health care rationing, which occurs in other nations that have socialized health care, such as 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 having too few doctors and nurses presents a danger to patients. At any one time, 4.5 million patients were waiting for hospital care.

The MFN Utilizes Obamacare to Circumvent Article I of the Constitution

We are also concerned that the MFN is being proposed through CMMI, an agency created by Obamacare. The agency was created with the goal of increasing efficiency in healthcare programs by conducting demonstrations in new health care delivery and payment for Medicare, Medicaid, and the Children’s Health Insurance Program.

The MFN demonstration is mandatory and being conducted across the entire country, so the proposal is a major policy change that is being proposed to circumvent Congress.

As such, CMMI and the MFN violate Article I of the Constitution, which gives Congress, not the executive branch the authority to make law. CMMI is not under the normal appropriations process and automatically receives $10 billion every decade in perpetuity. As a result, Congress is limited in its ability to conduct routine, necessary oversight.

Rather than utilizing CMMI to push broad policy changes on the country, CMS should work with lawmakers to enact long-term policy changes to lower prescription drug costs through competition, innovation and the removal of unnecessary regulatory burdens.

Conclusion

We urge you to withdraw the MFN interim final rule. This proposal would adopt foreign price controls that will harm America’s role as a leader in medical innovation. It will imperil the next generation of cures and threaten high-paying manufacturing jobs across the country.

It fails to stop foreign countries freeloading off American R&D and will instead move the U.S. closer to a system of government-controlled healthcare, with the rationing and lack of innovation we see in other countries. The MFN rule also circumvents the Congress’ constitutionally delegated role of making laws.

Sincerely,

Grover Norquist
President, Americans for Tax Reform

James L. Martin

Founder/Chairman, 60 Plus Association

Saulius “Saul” Anuzis

President, 60 Plus Association

Lisa B. Nelson CEO, American Legislative Exchange Council

Michael Bowman

President, ALEC Action

Phil Kerpen

President, American Commitment

Daniel Schneider
Executive Director, American Conservative Union

Dee Stewart

President, Americans for a Balanced Budget

Tom Giovanetti

President, Americans for a Strong Economy

Richard Manning

President, Americans for Limited Government

Brent Wm. Gardner
Chief Government Affairs Officer, Americans for Prosperity

Kevin Waterman Chair, Annapolis Center Right Coalition Meeting

John Toedtman

Executive Director, Caesar Rodney Institute  

Rabbi Aryeh Spero

President, Caucus for America

Ryan Ellis

President, Center for a Free Economy

Andrew F. Quinlan

President, Center for Freedom and Prosperity

Jeff Mazzella   

President, Center for Individual Freedom

Ginevra Joyce-Myers

Executive Director, Center for Innovation and Free Enterprise

Chuck Muth    
President, Citizen Outreach (Nevada)

Thomas Schatz President, Citizens Against Government Waste

Leo Knepper 

CEO, Citizens Alliance of Pennsylvania 

Regina Thomson

President, Colorado Issues Coalition

Jim Edwards
Executive Director, Conservatives for Property Rights            

Matthew Kandrach

President, Consumer Action for a Strong Economy

Yaël Ossowski

Deputy Director, Consumer Choice Center

Gregory Conko
Senior Fellow, Competitive Enterprise Institute

Katie McAullife
Executive Director, Digital Liberty

Erik Sass

Editor-in-Chief, The Economic Standard

Rick Watson

Chair, FL Center-Right Coalition

Annette Meeks

CEO, Freedom Foundation of Minnesota

Adam Brandon

President, FreedomWorks

George Landrith

President, Frontiers of Freedom

Grace-Marie Turner
President, Galen Institute (organization listed for affiliation purposes only)

J. Scott Moody

CEO, Granite Institute  

Ron Williamson

President, Great Plains Public Policy Institute  

Garrett Bess

Vice President of Government Relations and Communications, Heritage Action for America

Carrie Lukas

President, Independent Women’s Forum

Heather Higgins

CEO, Independent Women’s Voice

Andrew Langer

President, Institute for Liberty            

Dr. Merrill Matthews
Resident Scholar, Institute for Policy Innovation

Bartlett Cleland

Executive Director, Innovation Economy Alliance

Sal Nuzzo

Vice President of Policy, The James Madison Institute

Amy Oliver Cooke

CEO, John Locke Foundation

 Andrew Cline

President, Josiah Bartlett Center for Public Policy

CiCi Rojas

President, The Latino Coalition           

Seton Motley

President, Less Government

Colin Hanna

President, Let Freedom Ring

Doug McCullough

Director, Lone Star Policy Institute


Matthew Gagnon

President, Maine Policy Institute

Charles Sauer

President, Market Institute

Christopher B. Summers

President, Maryland Public Policy Institute  

Dee Hodges,

President, Maryland Taxpayers Association

Gene Clem

Spokesman, Michigan Tea Party Alliance

Jameson Taylor

Ph.D. Senior Vice President for Policy, Mississippi Center for Public Policy

Tim Jones

Chairman, Missouri Center-Right Coalition

Fmr. Speaker, Missouri House

David A. Ridenour

President, National Center for Public Policy Research 

Pete Sepp
President, National Taxpayers Union

John Tsarpalas

President, Nevada Policy Research Institute    

Bill O’Brien

Chair, NH Center Right Coalition

Doug Kellogg
Executive Director, Ohioans for Tax Reform

Sally Pipes

President, Pacific Research Institute

Wayne Winegarden, Ph.D. Sr. Fellow, Business & Economics, Pacific Research Institute

Joshua Crawford

Executive Director, Pegasus Institute

Daniel J. Erspamer

CEO, Pelican Institute

Stone Washington

Member, Project 21

Lorenzo Montanari
Executive Director, Property Rights Alliance

Paul Gessing

President, Rio Grande Foundation

Bette Grande

President & CEO, Roughrider Policy Center

Karen Kerrigan

President & CEO, Small Business & Entrepreneurship Council

Paul E. Vallely

Major General, US Army (ret) Chairman, Stand Up America US Foundation

David Miller

SW Ohio Center Right

David Williams

President, Taxpayers Protection Alliance

Kent Kaiser

Executive Director, Trade Alliance to Promote Prosperity

C. Preston Noell III

President, Tradition, Family, Property, Inc.              

Susan Gore

Founder, Wyoming Liberty Group