November 27, 2018
The Honorable Alex Azar
Department of Health and Human Services
200 Independence Avenue SW
Washington, DC 20201
We write in opposition to the administration’s Advanced Notice of Proposed Rule Making (ANPRM) to create an “International Pricing Index” (IPI) payment model for drugs administered under Medicare Part B.
The proposed payment model imports foreign price controls into the U.S. by modifying the Part B reimbursement rate so that it is calculated based off the prices set by 14 countries.
Instead of relying on government price setting, Medicare Part B is currently calculated based on market prices. The formula, which is based on the “Average Sales Price” (ASP) in the U.S. market, includes the discounts negotiated between payers, hospitals and health plans. Recently this system led to a 0.8 percent decrease in the cost of the top 50 Part B drugs.
In contrast, 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. 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.
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.
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.
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.
Ironically, the administration 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.”
We are also concerned that the IPI is being proposed through the Obamacare Center for Medicare and Medicaid Innovation (CMMI). There is long standing conservative opposition to CMMI based on the concern that it bypasses Congress’ power over the purse as enshrined in Article I of the Constitution.
CMMI is completely exempt from the Congressional appropriations process and is prone to being misused in ways that result in the executive branch of government usurping Congress’ role in setting policy.
The administration has repeatedly acknowledged that foreign price controls have damaged medical innovation.
Instead of fighting these price controls, we are concerned that the proposed International Pricing Index adopts them. This proposal will suppress competition and innovation and harm American competitiveness and investment.
We respectfully request that your department withdraw this proposal.
President, Americans for Tax Reform
James L. Martin
Founder/Chairman, 60 Plus Association
Saulius “Saul” Anuzis
President, 60 Plus Association
President, American Business Defense Council
President, American Commitment
Executive Director, American Conservative Union
President, American Consumer Institute
Lisa B. Nelson
CEO, American Legislative Exchange Council
President, Americans for a Balanced Budget
President, Americans for Limited Government
Andrew F. Quinlan
President, Center for Freedom and Prosperity
President, Center for a Free Economy
President, Center for Individual Freedom
Executive Director, Center for Innovation and Free Enterprise
Peter J. Pitts
President and Co-founder, Center for Medicine in the Public Interest
President, Citizens Against Government Waste
Chair, Citizens for Limited Taxation
Vice President for Strategy, Competitive Enterprise Institute
President, Consumer Action for a Strong Economy (CASE)
Health Economist/Managing Director, Consumer Choice Center
Deputy Director, Consumer Choice Center
Executive Director, Conservatives for Property Rights
President, Council for Affordable Health Coverage
Executive Director, Digital Liberty
President, Ethan Allen Institute
President, Family Business Coalition
Co-Chair, Florida Center-right Coalition
President, Frontiers of Freedom
President, Galen Institute
Naomi Lopez Bauman
Director of Healthcare Policy, Goldwater Institute
Mario H. Lopez
President, Hispanic Leadership Fund
Health Care Policy Center Director, Independence Institute
President, Independent Women’s Forum
Heather R Higgins
CEO, Independent Women’s Voice
President, Institute for Policy Innovation
President, Let Freedom Ring
President, Less Government
Chair, Maine Center-right Coalition
Founder/President, Market Institute
Co-Chair, Maryland Center-right Coalition
Chair, Massachusetts Center-right Coalition
Chair, Missouri Center-right Coalition
Former Speaker, Missouri House of Representatives
President, National Taxpayers Union
Co-Chair, New Hampshire Center-right Coalition
Executive Director, Ohioans for Tax Reform
President, Oregon Capitol Watch Foundation
President, Pacific Research Institute
President, Phyllis Schlafly Eagles
Executive Director, Property Rights Alliance
President, Rio Grande Foundation
President/CEO, Small Business & Entrepreneurship Council
President, Taxpayers Protection Alliance
Executive Director, Trade Alliance to Promote Prosperity
C. Preston Noell III
President, Tradition, Family, Property, Inc.