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Congressman Adrian Smith

Representing the 3rd District of Nebraska

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Government Takeover – Drug Pricing Edition

October 28, 2019
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According to the Centers for Disease Control and Prevention (CDC), nearly 50 percent of Americans took at least one prescription drug in the last month. When used correctly and safely, prescription drugs help millions of people by curing, treating, or preventing diseases. Our pharmaceutical system is designed to reward innovators by allowing them to bring new products to market at a price which allows them to recoup their investment, with generic or biosimilar versions later entering the marketplace to drive down prices through competition. However, the cost of prescription drugs, even some generics, has increased dramatically in recent years – well above inflation – making them harder to access.

In the Ways and Means Committee, we share a common goal of lowering prescription drug prices. This Congress we made significant progress on bipartisan reforms. In April the Ways and Means Committee unanimously passed the bipartisan Prescription Drug Sunshine, Transparency, Accountability and Reporting (STAR) Act (H.R. 2113) to help both Congress and the public to better understand the impacts of prescription drug spending and shortages, and the reasons behind significant price swings. This bipartisan effort was recently derailed by Speaker Pelosi’s drug pricing bill. Instead of building on bipartisan reforms, H.R. 3 would put the government in charge of drug pricing.

While the mandatory lowering of drug prices sounds good on the surface, it actually represents a federal takeover of the pharmaceutical marketplace through government price controls. By allowing unelected Washington bureaucrats to set prices for pharmaceutical products, H.R. 3 creates a system which will keep seniors from accessing some vital medications, impede competition in the marketplace, and stifle future breakthrough innovation. To make things worse, the price-setting will be based on the socialized medical systems of foreign countries. I voted against H.R. 3 in Committee, although it passed on a party line vote and is expected to advance to the full House for consideration.

As we have seen with every other government interference in the marketplace, this proposal may potentially have the opposite effect and cause prices to rise over time. Eliminating competition and innovation does not solve the root issue. Other nations which have turned to international pricing indexes see considerably less access to new prescription drugs than Americans.

H.R. 3 is not the path forward to lower drug prices, and I am concerned for the impact it would have on an important, yet less discussed issue of prescription drugs – innovation. Antibiotics, immunizations, and natural body chemical replacements have changed human life for the better, and were all a result of research, development, and marketing in the medical industry. We should be spurring innovation, not stifling it.

Fighting rising prescription drug prices is a bipartisan problem. It needs to have a bipartisan solution. For this reason, I have introduced a commonsense proposal to fix broken incentives in our health care system. When Medicare pays for drugs administered in a doctor’s office or clinic, they are reimbursed using a formula known as Average Sales Price (ASP) plus 6%. Reimbursement for a given drug is the same at every hospital or doctor’s office, regardless of what that hospital actually paid, and usually higher than actual cost. Because of this structure, more costly drugs get much larger add-on payments, incentivizing the use of more expensive drugs. My proposal would replace the ASP plus 6% formula, with a tiered reimbursement system, rewarding choosing lower cost drugs. The results would lower out-of-pocket costs for patients, while saving the government money.

As the debate continues on lowering prescription drug costs, it is my hope we can come together to find more commonsense solutions, such as my proposal. I will continue work toward this goal and oppose government take-overs of the marketplace.

 

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