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House Bill Setting Price Controls on Medicines Would Endanger Patients, Harm Innovation

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House Speaker Nancy Pelosi and Majority Leader Steny Hoyer plan to bring H.R. 3, the Lower Drug Costs Now Act, to the floor for a vote on Thursday. The bill would achieve its supposed savings by using other countries’ price controls to set a cap on prices here at home and then have the U.S. government negotiate downward from there. Drug firms that don’t agree to reduce their prices even more could be hit with a confiscatory 75 percent tax on gross sales – not profits, but three-quarters of a drug’s total sales revenue. Imposing draconian price controls on pharmaceuticals, would result in sharply lower medical research and development, and endanger the lives of countless patients, warn CEI Senior Fellows Gregory Conko and Patrick Hedger:

Senior Fellow Gregory Conko said:

“Like the mafia, the bill’s supporters are making an offer the pharmaceutical industry can’t refuse:  accept the obscenely low prices we demand or we’ll take most of your money. Since only one of ten drugs tested in clinical trials gets approved by the FDA, companies not only need to recover the cost of their blockbuster drugs, but the hundreds of drugs that don’t make a profit and the thousands that never even make it into pharmacies. With price controls, drug companies would be foolish to invest in future research and development.”​

Research Fellow Patrick Hedger said:

“Over the last year, the Democratic and Republican approaches to the issue of prescription drug costs can only be described as variations of the same flawed idea: price controls. Medicine is not immune to the laws of economics. Price controls on prescription drugs will cause shortages. In the case of an innovation-intensive industry like medicine, these shortages will manifest themselves, in part, as a lack of new research and development. Exorbitant healthcare costs are a direct product of decades of increasing government interference in the marketplace. Ratcheting-up this interference, particularly with simplistic price controls, has predictable and undesirable results.”