Feb. 7, 2019

Congress Must Pass Landmark Legislation to Stop Pharma Rip-Offs 

Statement of Robert Weissman, President, Public Citizen

Note: Today, U.S. Rep. Lloyd Doggett (D-Texas) and U.S. Sen. Sherrod Brown (D-Ohio) introduced the Medicare Negotiation and Competitive Licensing Act to allow the government to negotiate prices for Medicare Part D directly with pharmaceutical corporations and authorize generic competition when negotiations fail. Reps. Elijah Cummings (D-Md.) and Peter Welch (D-Vt.) and Sens. Amy Klobuchar (D-Minn.) and Tammy Baldwin (D-Wis.) co-lead the legislation. Also today, Sens. Brown and Kirsten Gillibrand (D-N.Y.) and Rep. Mark Pocan (D-Wis.) introduced the Stop Price Gouging Act, which penalizes corporations that raise pharmaceutical prices beyond the level of inflation.
Senators and representatives introduced two vitally important bills today that deliver pharmaceutical pricing reforms that patients and consumers desperately need and demand. Public Citizen strongly endorses these bills and applauds Reps. Doggett, Cummings, Welch and Pocan, and Sens. Brown, Klobuchar and Gillibrand for their leadership.

The prohibition on Medicare negotiation is utterly irrational. It is the law of the land for one reason only: the corrupting political influence of Big Pharma, including one of the most egregious revolving door arrangements in memory.  
Predictably, refusing to leverage bulk purchasing negotiating authority in purchase arrangements with monopolists leads to price gouging and dramatic overspending. 

Gargantuan savings can be obtained if Medicare is empowered to negotiate. With a researcher from Carleton University and using 2014 data, we found that if Medicare Part D had been able to pay what the Veterans Health Administration (VHA) did for prescriptions, it would have saved $16 billion – in just one year. The savings almost surely would be larger now than five years ago. Moreover, there is every reason to assume that Medicare Part D, if empowered to negotiate, could obtain savings significantly greater than the VHA is able to, simply because of the scale of Medicare purchases.
The Medicare Negotiation and Competitive Licensing Act would end this mega rip-off. It would grant Medicare the authority to negotiate. If a brand-name manufacturer refused to agree to a reasonable price, the government would authorize generic competitors to enter the market and provide the product affordably, while paying a reasonable royalty to the brand-name company. The licensing approach avoids even the hypothetical problem of important drugs not being available. 

Americans are furious about Big Pharma's rip-offs. An astounding 92 percent of Americans favor Medicare negotiation. The Medicare Negotiation and Competitive Licensing Act responds to this overwhelming demand, introducing a dose of common sense and overcoming one of the shameful and corrupt corporate giveaways in American history.

In his State of the Union address, President Donald Trump claimed that the cost of prescription medications is falling. In fact, the Associated Press found that Big Pharma spiked drug prices 96 times for each reduction in price. Big Pharma has baked constant increases into its business model. The Big Pharma corporations raise prices constantly simply because they can, without regard to the economic impact on patients, or even the fact that high charges lead to rationing of lifesaving treatments from insulin to EpiPen. 

The Stop Price Gouging Act is the cure for this epidemic of pharmaceutical price spikes. It would remove the incentive for spikes by imposing financial penalties proportionate to companies' unjustified increases.