A proposed revision in drug pricing policy could negatively impact one of North Carolina’s most important industries as well as patients — especially the nearly 2 million North Carolina seniors and people with serious medical issues who depend on Medicare for their health care coverage. Congress should instead consider effective ways to make health care more cost-effective, but H.R. 3 is not one of them.
H.R. 3 has been endorsed by Speaker Nancy Pelosi, although when you look at what it would do, it’s difficult to understand why. This plan would base drug prices for Medicare and private plans on costs set by foreign, state-controlled health care systems. This barely disguised form of government-mandated price controls would do what price controls always do — restrict access and decrease choice. That is not what patients need or deserve, and it would be bad for pharmaceutical innovation and economic growth.
Established facts back this up. In foreign countries that arbitrarily set drug prices, patients have far less access to prescription medications. A survey of new drugs introduced into the market since 2011 found that in countries like Canada and France patients have access to roughly only half of these innovative medicines. American patients and doctors can utilize almost all of them; availability here is nearly 90 percent.
Because of government price fixing, innovative cancer treatments are also more commonly unavailable in the countries using this proposed pricing strategy, often referred to as international reference pricing. Compared to the U.S., cancer patients in Canada, France, Germany and other countries have to wait an average of 15 months longer for the prescription drug treatments their doctors want them to have.
Government meddling in what should be a free market also will heavily impact companies in the biopharmaceutical industry, which is a mainstay of the North Carolina economy. We have the third-largest drugs and pharmaceuticals sector in the U.S., a $56 billion industry that provides living-wage jobs for 132,500 workers and pays $1.4 billion a year in state and local taxes. It’s steadily expanding too. The North Carolina biotechnology industry has grown by 30 percent in less than 20 years.
Some proponents of H.R. 3 have tried to deflect criticisms of the plan by claiming that it is not government price fixing but rather a system in which drug companies would be able to “negotiate” prices with bureaucrats. But that’s hardly true. Not only can the government set the price, but they also have the power to fine drug manufacturers that refuse to accept the government’s offer, no matter how far below market price, with a retroactive 95 percent tax on the company’s gross drug sales. That’s not negotiation; it’s state punishment of a private sector company that doesn’t do as they’re told, retribution that could put them out of business for good.
H.R. 3 is simply bad policy, and yet another example of the failure of some lawmakers to “get it.” They don’t understand that Americans don’t want further government interference that could undermine the insurance coverage that seniors have paid into their entire working lives. And they certainly don’t understand the economic ramifications of policies that disrupt free markets and stifle medical innovation.
By forcing fundamental changes in Medicare Parts B, D, and Medicaid over 10 years, H.R. 3 would cut government spending but do almost nothing to reduce the amount patients have to pay. That’s hardly an improvement from the viewpoint of vulnerable patients relying on Medicare and want nothing more for their money than adequate health care coverage.
Medicare enrollees and vulnerable patients across the country were promised high-quality medical care and that is what they should receive. Not the self-serving government-centric policies before the Senate or the watered-down version of failed foreign health care strategies that H.R. 3 would hand them.
John Skvarla is the former secretary of the North Carolina Department of Commerce. He is currently an attorney practicing in Raleigh.