06.02.2021 0

ALG Joins Coalition Fighting Price Controls on American Medical Innovation

Far-left politicians are committed to imposing socialist policies on the entire American healthcare system. Price controls on medicines are just the first step. 

By Catherine Mortensen

As millions of Americans enjoyed a Memorial Day weekend with backyard barbecues and trips to the beach, many took time to remember and honor our nation’s fallen warriors. Certainly, no one has ever done more to protect our life, liberty, and happiness than those men and women who gave their lives in defense of freedom.

But, in the era of Covid, do we not owe some small debt of gratitude to America’s pharmaceutical industry?

It’s because of our incredible men and women in the pharmaceutical world that almost half of Americans have been fully vaccinated against the Covid-19 virus and are able to put the pandemic behind us.

Given their immense contribution to our nation in a time of peril, it would be wrong for Congress to seek to cripple our medical innovators with a measure that would make it all but impossible for them to develop life-saving vaccines and drugs in the future.

That is why Americans for Limited Government signed onto a coalition letter with 71 organizations and activists urging members of Congress to oppose H.R. 3.

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This legislation imposes new taxes and government price controls on American medical innovation. It creates a 95 percent excise tax on manufacturers and imposes an international reference pricing scheme that directly imports foreign price controls into the U.S.

The letter outlines several ways in which this bill will harm American patients and degrade America’s world-leading role in medical innovation.

H.R. 3 would impose price controls from socialized medicine systems. Countries like Australia, the United Kingdom, and Canada would be able to dictate the terms of the American marketplace for medicines. Our patients and innovative research and development would pay the price.

H.R. 3 would weaponize the tax code and enact a discriminatory 95 percent excise tax on manufacturers. Under the legislation, pharmaceutical manufacturers that do not agree to foreign price controls would face a retroactive tax of up to 95 percent on the total sales of a drug (not net profits).

This means that a manufacturer selling a medicine for $100 will owe $95 in tax for every product sold with no allowance for the costs incurred. No deductions would be allowed, and it would be imposed on manufacturers in addition to federal and state income taxes they must pay.

This package of foreign price controls with a punitive excise tax on medicines will harm American patients by limiting access to new cures. Countries like Australia, the United Kingdom, and Canada often have to wait years before accessing the same treatments Americans get right away.

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. In many cases, Americans are able to buy less expensive generics before countries with socialized medicine can even access the underlying new medicines.

H.R. 3 will threaten high-paying manufacturing jobs across the country at a time when we are just emerging from the economic wreckage from the pandemic. According to a 2017 study by TEConomy Partners, pharmaceutical manufacturers invest $100 billion in the U.S. economy every year, directly supporting 800,000 jobs including jobs in every state. These jobs are high-paying – the average compensation is $126,000 – more than double the average wage in the U.S. When accounting for indirect and induced jobs, medical innovation supports more than four million jobs.

The need for free market policies that promote American medical innovation is clear now more than ever. Thanks to American ingenuity, some of the most effective vaccines in history have been developed to fight the Coronavirus pandemic, at the fastest rates ever. In fact, vaccines developed by Pfizer and Moderna are both over 90 percent effective– a groundbreaking improvement over the typical flu vaccine, for example, which is 40 to 60 percent effective.

Beyond the obvious destruction of innovation by drug companies that will harm today’s seniors and generations to come, one of the prime lessons from the Chinese-originated virus crisis has been that America needs to bring the drug manufacturing sector home. Foreign fixed pricing incentivizes pharmaceutical companies to skirt U.S. safety and cleanliness standards in favor of cheap foreign manufacturing because if they are price controlled on one end, they will need to cut costs on the other.  Rather than decreasing our dependency on foreign-made drugs, this will dramatically increase it.

We also learned that when America’s biotech scientists are given maximum freedom to innovate, they excel. The incredible success of President Trump’s Operation Warp Speed is seen in the dramatic drop in the Covid death rate. Between January and April of this year, the death rate dropped almost by half, from .52 percent of probable cases to .33 percent.

To help flatten or lower prescription drug costs, the Biden administration should engage in a full review of the Food and Drug Administration regulations which empower bureaucrats to impose millions of dollars of costs on prospective new drugs simply because they can.  In 2014, Tufts University found that the average cost of bringing a new drug to market is $2.6 billion.  With patent lengths of approximately twenty years, the long, drawn out FDA approval process eats up approximately twelve years from the laboratory to the pharmacy shelf, and once the patent life starts ticking, the drug developer is in a race against the clock to be able to recoup their costs and make a profit.

Small, innovative drug manufacturers simply cannot compete when there is a regulatory-driven $2.6 billion cost to bring their cures and treatments to market. The answer to high drug prices is not found in foreign socialist government pricing models but instead in making the cost for new drug development dramatically lower so there will be more competition in the marketplace.

Far-left politicians are committed to imposing socialist policies on the entire American healthcare system. Price controls on medicines are just the first step.

Catherine Mortensen is Vice President of Communications at Americans for Limited Government.

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