We oppose negotiations on Medicare Part D drug prices

We are deeply concerned about proposed legislation that would lead to negotiation of pharmaceutical prices by the federal government for the new Medicare Part D drug benefit.

Under current law, negotiations over prices are conducted between the pharmaceutical producers and private firms administering drug benefit programs for Medicare beneficiaries.  With federal spending on pharmaceuticals is projected to grow to about $100 billion in 2007 — over 40 percent of the U.S. total —some policymakers now advocate federal negotiation of prices with the pharmaceutical producers, in order to use the large size and bargaining power of the federal government to achieve sharply lower prices.

Federal price negotiations would represent a policy change carrying significant risks for research and development investment in new and improved medicines. A substantial body of research shows that similar federal drug programs impose prices substantially lower than those negotiated in the private sector, and that such lower prices inevitably will reduce research and investment in new and improved medicines. This slowdown in pharmaceutical innovation will yield highly adverse effects upon future patients in terms of reduced life expectancies.

We urge Congress not to support negotiation of drug prices by the federal government.

William P. Albrecht, University of IowaDonald L. Alexander, Western Michigan UniversityWilliam R. Allen, University of California, Los AngelesCharles W. Baird, California State University, East BayStacie Beck, University of DelawareJames T. Bennett, George Mason UniversityElizabeth Bogan, Princeton UniversityKenneth W. Chilton, Lindenwood UniversityRobert Collinge, University of Texas, San AntonioGregory Conko, Competitive Enterprise InstituteGreg Delemeester, Marietta CollegeArthur M. Diamond, Jr., University of Nebraska, OmahaJoseph A. DiMasi, Tufts UniversityKenneth G. Elzinga, University of VirginiaStephen J. Entin, Institute for Research on the Economics of TaxationFrank Falero, California State University, BakersfieldDarren Filson, Claremont Graduate UniversityJohn Goodman, National Center for Policy AnalysisHenry G. Grabowski, Duke UniversityJohn R. Graham, Pacific Research InstituteDavid Gratzer, Manhattan Institute for Policy ResearchKenneth Green, American Enterprise InstituteSteven F. Hayward, American Enterprise InstituteDavid R. Henderson, Hoover Institution, Stanford UniversityGeorge Horwich, Purdue UniversityPaul I. Howard, Manhattan Institute for Policy ResearchSam Kazman, Competitive Enterprise InstituteDaniel Klein, George Mason UniversityMichael I. Krauss, George Mason UniversityRichard N. Langlois, University of ConnecticutNicholas A. Lash, Loyola University of ChicagoJohn R. Lott, State University of New York, BinghamtonKerry Macintosh, Santa Clara UniversityJohn McClaughry, Ethan Allen InstituteRoger E. Meiners, University of Texas, ArlingtonAdrian Moore, Reason FoundationJames B. O’Neill, University of DelawareJune O’Neill, Baruch College, City University of New YorkSally C. Pipes, Pacific Research InstitutePeter J. Pitts, Center for Medicine in the Public InterestRobert W. Poole, Jr., Reason FoundationJay R. Ritter, University of FloridaPhilip J. Romero, University of OregonMark Rush, University of FloridaMike Schuyler, Institute for Research on the Economics of TaxationWilliam F. Shughart II, University of MississippiFred L. Smith, Jr., Competitive Enterprise InstituteJohn C. Soper, John Carroll UniversityAlex T. Tabarrok, George Mason UniversityJohn A. Vernon, University of ConnecticutMurray L. Weidenbaum, Washington UniversityPaul J. Zak, Claremont Graduate UniversityBenjamin Zycher, Manhattan Institute for Policy Research

None of the individuals signing this letter receives funding from pharmaceutical interests, but some of the affiliated institutions (listed for identification purposes only) receive such research funding.