CEI Joins Coalition Letter Opposing Foreign Reference Pricing Legislation
Dear Member of Congress:
We write in opposition to proposals that import foreign price controls on medicines into the U.S. through international reference pricing.
Reference pricing legislation has been introduced by Senator Rick Scott (R-Fla.) and co-sponsored by Senator Josh Hawley (R-MO). Similar legislation has been by introduced by self-avowed socialist Senator Bernie Sanders (I-Vt.) and Progressive Caucus Vice Chair Ro Khanna (D-Calif.).
Both bills are similar – they reference price U.S. drugs based on the prices in Canada, the United Kingdom, France, Germany, and Japan.
Foreign countries frequently utilize a range of arbitrary and market-distorting policies to determine the cost of medicines – by definition, such approaches are price controls.
Conservatives have long opposed price controls because they utilize government power to forcefully lower costs in a way that distorts the economically-efficient behavior and natural incentives created by the free market.
These pieces of legislation are similar to the International Pricing Index proposal released by the Department of Health and Human Services. This proposed payment model modifies the Part B reimbursement rate so that it is calculated based off the prices set by 14 countries.
When imposed on medicines, price controls suppress innovation and access to new medicines. This deters the development and supply of new life saving and life improving medicines to the determent of consumers, patients, and doctors.
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.
This is not hypothetical. As noted in a study by the Galen Institute, roughly 290 new medical substances were launched worldwide between 2011 and 2018. Of these medicines, the U.S. had access to 90 percent.
In contrast, foreign countries have access to far fewer. The United Kingdom had 60 percent of medicines, Japan had 50 percent, and Canada had just 44 percent.
The U.S. is a world leader in research & development because the system of healthcare rejects price controls and encourages innovation. As a result, a majority of new medicines are developed and launched in America.
This innovative environment is enormously beneficial to the long-term well-being of Americans and the efficiency of the U.S. healthcare system. In addition, the investment required for research and development of medicines leads to more high-paying jobs and a stronger economy.
Importing price controls will undermine this system by basing U.S. prices on the prices of socialized foreign healthcare systems. This will inevitably suppress innovation and harm American competitiveness.
The administration has recognized the damage that adopting foreign pricing would have on American innovation 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.”
Instead of fighting these price controls, we are concerned that the both the Sanders-Khanna legislation and the Scott legislation adopts them.
Proposals to import foreign price controls will suppress competition and innovation, harm American competitiveness and investment, and should be rejected by Congress.
President, Americans for Tax Reform
James L. Martin
Founder/Chairman, 60 Plus Association
Saulius “Saul” Anuzis
President, 60 Plus Association
CEO, ALEC Action
President, American Business Defense Council
President, American Commitment
President/CEO, The American Consumer Institute
Director of Government Affairs, American Conservative Union
President, Americans for a Balanced Budget
President, Americans for Limited Government
Chair, Annapolis Center-Right Coalition
President, Center for a Free Economy
Andrew F. Quinlan
President, Center for Freedom and Prosperity
President, Center for Individual Freedom
Executive Director, Center for Innovation and Free Enterprise
Peter J. Pitts.
President, Center for Medicine in the Public Interest
Vice President for Strategy, Competitive Enterprise Institute
Executive Director, Conservatives for Property Rights
President, Consumer Action for a Strong Economy
Health Care Economist/Managing Director, Consumer Choice Center
Deputy Director, Consumer Choice Center
President, Council for Affordable Health Coverage
President, Council for Citizens Against Government Waste
Executive Director, Digital Liberty
Co-Chair, Florida Center-Right Coalition
President, Frontiers of Freedom
President, Galen Institute
Naomi Lopez Bauman
Director of Healthcare Policy, Goldwater Institute
Rodolfo E. Milani
Trustee, Hispanic American Center for Economic Research (HACER)
Mario H. Lopez
President, Hispanic Leadership Fund
Heather R. Higgins
CEO, Independent Women’s Voice
President, Institute for Liberty
President, Institute for Policy Innovation
Vice President of Policy, James Madison Institute
President, Less Government
President, Market Institute
Chair, Massachusetts Center-Right Coalition
Chairman, Missouri Center-Right Coalition
Fmr. Speaker, Missouri House
President, National Taxpayers Union
Former Speaker, New Hampshire House of Representatives
Co-Chair, New Hampshire Center-Right Meeting
Director, Ohioans for Tax Reform
Executive Director, Oregon Capitol Watch Foundation
President, Pacific Research Institute
Executive Director, Property Rights Alliance
President, Rio Grande Foundation
President & CEO, Small Business & Entrepreneurship Council
President, Taxpayer Protection Alliance
Executive Director, Trade Alliance to Promote Prosperity
C. Preston Noell III
President, Tradition, Family, Property, Inc.