Don't Impose Foreign Price Controls on Prescriptions
Biotech, pharmaceutical, and medical provider organizations have sued the Trump administration over an overreaching rule that imports foreign government-run medical systems’ price controls as a gambit to lower prescription drug prices.
The stakeholders contesting the price controls measure include the Association of Community Cancer Centers, the Global Colon Cancer Association, the National Infusion Center Association and the Pharmaceutical Research and Manufacturers of America in a lawsuit filed in Maryland. Biocom California, the Biotechnology Innovation Organization, and the California Life Sciences Association filed a separate lawsuit in California.
They contend that the “Most Favored Nation” interim final rule exceeds statutory authority, is unconstitutional, and doesn’t follow required rulemaking procedures designed to ensure fairness and due process.
When most people hear “lower drug prices,” they probably think about their share of the cost at the pharmacy counter. The imported-foreign-price-controls rule does nothing about that.
Rather, the MFN regulation applies initially to 50 Medicare Part B drugs and biologics. Part B generally covers medications injected or infused at a physician’s office, a cancer center, or similar clinical setting.
The medications administered in clinical settings are among the most advanced, complicated medicines. They’re some of the most innovative products for conditions such as cancer and serious neurological conditions.
And Medicare patients often present more complex cases requiring the learned care of a skilled practitioner for a desirable outcome.
Lowering drug prices — or rather forcing biopharma innovator companies to accept artificially, arbitrarily low amounts for a successful, effective, safe drug product — has been a hobbyhorse for the president.
It’s too bad he’s erring on the side of government’s heavy hand instead of actually forcing “foreign freeloader” countries to pay a fair, value-based, market-based price for American-made breakthroughs. This contrasts starkly with his strong deregulatory record that sparked the best economy in half a century until the pandemic struck.
In 2018, the Trump administration floated the idea of government price controls on certain pharmaceuticals. An international price index was to be applied to Part B drugs. The IPI would have averaged the prices of certain drugs that government-operated health systems dictate in several nations, and then established a target price for each drug that would have resulted in roughly a 30 percent reduction in Part B spending over time.
The Nov. 27, 2020, Centers for Medicare and Medicaid Services rule goes even further. The “Most Favored Nation” pharma price control for Medicare Part B drugs and biologics is even more radical than the IPI.
MFN basically adopts the lowest government-set rate of selected member nations of the Organisation for Economic Cooperation and Development. MFN imports the worst price these foreign governments demand for a given Part D medicine.
This means that MFN drives to the bottom. It treats complex, novel medications as mere commodities. Government-set price controls such as MFN ignore the value, the investment, and the early access novel pharmaceuticals and biologics represent.
The “Most Favored Nation” drug price control is dressed up as a 7-year test of a model for reducing the prices Medicare Part B pays for drugs and biologics. In reality, MFN is less model-testing and more policy change by government fiat. That was a favorite ploy of the Obama-Biden regime.
MFN applies to Part B providers and suppliers nationwide. Participation is mandatory. CMS’s heavy-handed, undemocratic policymaking deserves as severe criticism as Obama’s CMMI schemes did.
CMS doubles down on these Obama-Biden-era excesses. The CMS Innovation Center in the previous administration rightly caught withering criticism for trotting out “pilot projects” that actually forced policy changes without due process or congressional authorization.
End-running Congress and regulatory due process are wrong, whether the guilty administration is Democratic or Republican.
MFN is reckless and foolish. It represents a step toward the government taking over our health system. It conforms to socialistic aspects of “foreign freeloader” nations instead of requiring them to respect property rights, market competition and the rule of law.
Importing foreign price controls doesn’t foster innovation or competition; it crimps them. The prices being referenced are decided and demanded by foreign bureaucrats, not by the free market or fair negotiations.
And artificially depressed payments bleed returns on years of R&D investments, while depriving biopharma innovators of resources for discovering and creating new drugs.
The judicial branch should closely scrutinize these overreaches, enjoin the MFN power grab from taking effect and block CMMI’s unwarranted, illegal abuse of its narrow statutory authority. Then let’s get about the business of forcing foreign price controllers to negotiate with our drug companies fairly and pay reality-based rates for novel medicines.
James Edwards is executive director of Conservatives for Property Rights (@4PropertyRights) and patent policy advisor to Eagle Forum Education and Legal Defense Fund. The views expressed are his own.