H.R. 3 = Government Price Controls
The House of Representatives has passed harmful legislation, H.R. 3—the Lower Drug Costs Now Act—that imposes government set price controls on prescription drugs. Government price controls will cause hundreds of thousands of Americans to lose their jobs, reduce spending on cutting-edge medical research, and negatively impact our world-class economy.
America is known as a leading innovator. If we lose access to ground-breaking medicines, patients will lose access to new cures for diseases like cancer and Alzheimer’s. Research and jobs are also likely to move abroad to places like China as other countries ramp up their own investments.
Today, the American biopharmaceutical industry directly employs more than 800,000 Americans. An additional three million jobs in industries from construction (building labs) to business services are supported by this industry. The House passed legislation could result in the loss of over 700,000 jobs.
This legislation will also mean that average Americans with employer sponsored health insurance, or who are on Medicare will lose access in the future to cutting-edge medicines
There are Better Policy Choices
Rather than enacting government price controls which will inhibit access to new cures in the future and cost hundreds of thousands of Americans their jobs, Congress should pass legislation to:
- Rework and reform the Medicare Part D benefit design.
- Facilitate the approval of generics and biosimilars.
- Help reduce costs for all Americans by moving towards a more value-based system that rewards outcomes and limits costs.
- Help Americans with out-of-pocket costs through expansion of Health Savings Accounts and Health Reimbursement Arrangements.
- Expand coverage options through mechanisms like Association Health Plans.
- Solidify the ACA’s exchanges through the use of risk corridors and funding cost-sharing reduction payments.
U.S. Chamber Letter to U.S. House of Representatives
The U.S. is the medical innovation capital of the world. No other country compares with ours in terms of groundbreaking research, quality of care, and access to lifesaving treatments.
But a new bill in Congress could change all of that.
In the next few weeks, the U.S. House of Representatives is expected to consider the Lower Drug Costs Now Act, legislation that if passed would endanger the livelihood of one million Americans and cut off medical research dollars that are essential if we ever hope to find a cure for diseases like cancer and Alzheimer’s.
Proponents of this bill claim that it would lower prescription drug prices through government “negotiation.” But under this regime, the “negotiation” would be similar to what you would expect if you tried to negotiate your tax rate with the IRS. That is to say, no negotiation at all. So let’s call a spade a spade and identify this proposal for what it really is: government price setting.
Government price controls always have negative consequences. In this instance, price controls on pharmaceuticals would reduce investments in new medical research and employment in an industry that to date has been an American success story.
How do we know? Because 30 years ago, Europe went down the path of government price regulation now being suggested by House Democrats—and the results were disastrous.
In 1986, European investment in pharmaceutical R&D exceeded investment in the U.S. by about 24%. But after nearly two decades of government price controls, investment in Europe trailed the U.S. by about 15%. As a result, there were 46 fewer new medicines introduced by European companies and over 1,500 lost research jobs. Today, Europe trails the U.S. in research investment by nearly 40%, and Europeans have access to fewer treatments than Americans overall.
According to recent estimates, the proposal from House Democrats would cost drug makers approximately $1 trillion over the next decade, forcing them to drastically reduce investment in R&D. This cost-cutting would lead to fewer workers, and ultimately, fewer treatment options for families in need.
Today, the U.S. biopharmaceutical industry directly employs more than 800,000 Americans. And the industry supports an additional three million jobs in sectors as varied as construction (building labs) to business services (sales, marketing, and administrative support). In total, the House Democratic proposal could result in the loss of over 700,000 jobs. While every state would be impacted, some would see greater job losses than others, including California, Texas, and New Jersey.
Even more troubling, this plan would likely result in Americans having access to fewer treatments. Of all the new medicines launched across the world between 2011 and 2018, 90% are available in the U.S. But many of these new drugs are not available in countries with government price controls. In fact, only 50% of these new drugs are available in France and only 46% are available in Canada.
If this bill were to become law, American workers who like their employer-sponsored healthcare plan would find they have increasingly diminished access to the latest and most innovative treatments. That is the last thing anyone wants.
Of course, this proposal isn’t bad for everyone. There is one potential winner from all of this: China. When Europe adopted price controls, investments in research and the associated benefits moved to the U.S. Now, if Congress adopts similar price control policies, those same research dollars and jobs are likely to move to places like China.
As if the business community needed one more reason to oppose drug price-fixing, consider as well the incredibly dangerous precedent this legislation would set. If Congress starts setting prices for prescription drugs, then why not hospital treatments and doctor visits too? And if Congress can set prices for healthcare, then why not also food, energy, and other life essentials?
This job-killing legislation would put our country on an uncertain path, in addition to limiting treatment options for millions of Americans. The good news? The bill being considered in the House isn’t our only option—there are bipartisan proposals in Congress that would help lower drug costs without harming jobs, R&D, and access to medication. We encourage our nation’s leaders to seriously consider these commonsense solutions so that the U.S. can remain on the leading edge of medical innovation.