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AFP: Reduce Drug Prices and Boost Access Through a Personal Option, Not Government Rationing

Apr 22, 2021 by AFP

Arlington, Va. – Today, House Democrats introduced H.R. 3. While the goal of the legislation – lowering prescription drug prices – is laudable, the plan is deeply flawed and would cause far more harm than good, leading to widespread drug shortages and stifling the development of new life-saving medicines.

A smarter approach would be to give Americans a personal option for prescription drugs that creates a greater supply of available medicines. Lawmakers could do this in a few ways, including:

  • Streamlining the U.S. Food and Drug Administration’s drug approval process so that new drugs are approved at the same rate of speed as the COVID-19 vaccines;
  • Removing barriers that block access to generic versions of drugs;
  • Allowing for more legal drug importation from other countries; and more.

AFP Senior Health Policy Fellow Dean Clancy issued the following statement:

“Making prescription drugs more affordable doesn’t have to be a zero-sum game that forces patients to choose between lower prices and access to the treatments they need. A rationing scheme that puts the government in charge of Americans’ medicine cabinets is the wrong prescription that would only hurt those we need to help. Instead of H.R. 3’s approach, lawmakers should give Americans a personal option that brings drug prices down and boosts access to prescription medicines by increasing competition, expanding choice, and promoting innovation.”

Going forward, Americans for Prosperity will educate Americans in districts across the country about the dangers of H.R. 3 and why lawmakers should work together in bipartisan fashion to create a personal option for prescription drugs.

Background:

In a December 2019 report, the White House Council of Economic Advisers estimated that H.R. 3 would reduce the pharmaceutical spending on research and development by $75 billion to $200 billion over the next decade. If price controls were to reduce R&D by $200 billion over the next 10 years, the CEA concluded, the industry will introduce as many as 100 fewer products over that period. Instead of 300 new drugs, Americans would see 200. According to the CEA, Americans would be less healthy and less economically productive. The $34.5 billion in annual savings that the federal government would realize from price controls would reduce annual economic output by $375 billion to $1 trillion, imposing a cost to society 10 to 30 times the federal savings.

Price controls have failed in other areas of the globe. In the European Union, price controls have led to drug shortages. Meanwhile, while Americans enjoy access to 89 percent of new drugs, Canadians only have access to about half, because its government deems most new drugs “too expensive.”

AFP’s plan, the personal option, would reduce drug prices while boosting access through the following reforms:

Faster Drug Approvals. Reform the FDA’s drug approval process to reduce prescription drug costs. Grant automatic approval to any therapy approved as safe by advanced countries we trust.

More Generic Competition. Promote robust generic competition through sensible, bipartisan reforms that respect the just rights of inventors. Many such reforms can be found in House bill HR 19 and the Senate’s Wyden-Grassley drug reform proposal.

Tax-Free Savings for All. Let every American save and spend for prescription drugs, tax-free. Allow every Americans have a tax-free Health Savings Account (HSA) and thus a generous discount on every out-of-pocket prescription-drug expense. For lower-income individuals, provide means-tested government contributions, so they too can benefit from this powerful tool. Codify the current federal rule on Health Reimbursement Arrangements (HRAs), so employees can use pre-tax contributions from their employer to purchase personally owned, portable health insurance that includes good-quality prescription drug coverage that meets their individual needs.

Legal Drug Importation. Allow individuals and importers to bring legal prescription drugs into this country without hindrance.

Better Medicare Drug Coverage. Auto-enroll all new Medicare enrollees into a high-quality, low-premium Medicare Advantage plan that includes good drug coverage, while allowing them to opt into original Medicare if they wish. Protect those who opt into original Medicare from excessive drug costs by capping their total Part D out-of-pocket cost exposure and eliminating the infamous “donut hole” coverage gap.