House Speaker Nancy Pelosi’s ill-contrived prescription-drug plan would limit innovation, delay access to lifesaving drugs and devastate a key American industry, thereby jeopardizing hundreds of thousands of high-paying jobs.
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Washington politicians have long called for pulling out all the stops to keep major industries in the U.S., and yet to score cheap political points, many are now willing to lose a key global industry.
The plan may sound relatively benign: “H.R. 3 will enable HHS to negotiate for fair prices that reward genuine innovation and recoup research and development costs — but not unjustifiable prices that gouge patients,” reads a summary. Read further, however, and one discovers “negotiate” is a misleading way to describe a core component of the proposal.
Companies handpicked to “negotiate” with HHS, but who decline — or step away from the negotiating table before talks conclude — would face an “excise tax” equal to 75 percent of prior-year gross sales of the drug in question. The New York Times reports, however, that the penalty would be even steeper, with an additional 10 percent added every quarter the drug company in question remains noncompliant.
Doesn’t sound like much of a negotiation does it? Sounds more like charging the price government tells you – or else.
More harmfully, the Pelosi prescription-drug plan would mandate that the price of 250 brand-name drugs be set at no more than 120 percent of what a specific drug costs on average in six countries: Australia, Canada, France, Germany, Japan and the United Kingdom.
These price controls would destroy innovation. It takes around $2.6 billion to successfully develop and bring a new drug to market. Foreign governments rarely pay a price – as we do in the U.S. – that covers these steep development costs. We’ve seen the results of such harmful price-control policies before.
“Over the past 50 years, the share of new drugs originating in countries such as France, Germany, and the U.K. has plummeted from 45 percent to 20 percent. Manufacturers mostly flocked to America, which provides companies across industries pricing flexibility and strong intellectual property protections,” writes Ross Marchand, policy director for the Taxpayers Protection Alliance.
The Pelosi scheme sets an arbitrary price, ignoring that price controls used by those nations are exactly what causes the longer wait times and limited access to groundbreaking medicines that are ubiquitous in those countries.
“We found that, contrary to public assertions, the median time for approval for new cancer medicines in the United States was just six months — and that these new anticancer medicines are typically available in the United States before they are in Europe,” reports Health Affairs.
Compare our wait time to the average cancer drug approval times abroad – 10.6 months in Europe, 14.9 months in Canada, and 15.6 months in Australia, according to JMCP – and you can see how price controls could harm patients who need these lifesaving treatments, and fast.
Adopting European price controls in the U.S. may sound appealing to some, but they won’t help patients awaiting better therapies in hospitals across the country.
Remember, under this fairytale plan — completely untethered from the reality of what it costs to conduct research, develop and manufacture a prescription drug — companies may fold under the weight of the financial penalties or find that the economic incentives for developing new drugs not great enough to warrant the investment needed to bring the drug to market.
The result? Promising drugs never get into the hands of sick patients who need new and better therapies.
While the pharmaceutical industry is a favorite target for certain politicians and activists, the fact is it is a key American industry – one that leads the world. Implementing the policies Pelosi proposes would mean directly compromising the more than 800,000 high-paying jobs the pharmaceutical industry creates and jeopardizing an additional 3.2 million more jobs created in support of the pharmaceutical industry.
“In 2015, the direct biopharmaceutical jobs generated $104 billion in total wages and benefits — averaging $129,527 per worker,” Pharmaceutical Research and Manufacturers of America reports. “This annual average compensation was more than twice the U.S. private sector average of $58,688, which is an indication of the high-quality jobs the biopharmaceutical industry provides to U.S. workers.”
If the U.S. pursues these policies, following Europe’s lead, American patients will suffer, and we will lose this industry and the jobs and global innovation leadership that goes along with it.
We cannot afford the blow the Pelosi plan would deliver to the development of innovative, lifesaving drugs. Nor can we afford to see an entire pharmaceutical industry and the livelihood of its workers crumble because of the massive penalties and red-tape imposed by these bureaucrats.
It is time to close the curtains on this political theater. Common-sense reforms can be enacted while not crippling a truly vital, vibrant industry.
Steve Forbes is chairman and editor-in-chief of Forbes Media.