I wrote a few weeks ago about House Speaker Nancy Pelosi’s H.R. 3 (the oh-so wonderfully titled Lower Drug Costs Now Act) that is forecast to be catastrophic to the future of drug innovation by imposing an outrageous 95% tax on certain drugs if the manufacturers don’t go along with the speaker’s onerous plan. While I stand by my previous commentary that her bill relies on make-believe, on further contemplation, I believe that she just might be acting as a flunky.
For those of us to the right of Joseph Stalin, this isn’t a daring conclusion. But for the rest of you, let me explain what I mean. Magicians use stooges to help sell a trick, and politicians use stooges to sell their policy.
H.R. 3 is so far out there and getting worse that the speaker of the House must understand that it has no chance of passing in the Senate, but she continues to push it forward. There are many possible reasons for this, including ego, but far more possible is that she is helping misdirect the narrative in Washington while other bills gain traction.
For instance, Rep. David Cicilline, chairman of the House Judiciary Committee’s Subcommittee on Antitrust, introduced a bill attacking the pharmaceutical industry as well, “The Affordable Prescriptions for Patients Through Promoting Competition Act,” which would seek to grant the Federal Trade Commission broad authority to prohibit “anti-competitive behaviors” of drug manufacturers, specifically “product hopping.” While I believe that his bill is just as bad for medical innovation as the Pelosi bill, unlike H.R. 3, there is a similar bill in the Senate that was introduced by Texas Sen. John Cornyn.
So, for those keeping score: Pelosi’s bill, which was introduced in the Democrat-controlled House, has no Republican support in the Senate. Cicilline’s bill has a Republican introduced counterpart in the Republican-controlled Senate. Additionally, both sides of the aisle and both chambers seem to be gunning for the pharmaceutical industry, which gives these bills (Cicilline’s and Cornyn’s) a better than 0% chance of passing. That is significant in a split Congress, and more than can be said of Pelosi’s H.R. 3.
Therefore, it just makes sense that Pelosi is misdirecting the audience, and in the process making Cicilline look like a better politician.
The problem is that Cicilline’s bill would still strangle innovation. It just isn’t as overt or as straight forward about it as the speaker’s bill and her 95% tax. When writing about the Cornyn bill I called it diarrhea-inducing, and Cicilline’s would have the same side effects, they both disregard that innovations can be made after the initial finding, and instead of leaving it up to the market to decide if an innovation is worthy of more money — they leave it up to an unelected and unaccountable bureaucrat to make the call. I don’t know what innovations are important and which ones aren’t, but I know that I would rather my doctor decide (and talk to me about it) than having the choice stripped away completely.
The economic piece that both Cornyn’s bill and Cicilline’s miss is that new formulations take more research and development. If a company can’t recover that money (for instance, by defending their space with a patent), then they are less likely to invest money in the new formulation. Longer-acting insulin, slow-release tablets, less diarrhea, less heartburn, fewer side-effects — where the line will be drawn isn’t known, and these politicians are just asking us to trust them.
Neither side of the aisle has earned that trust.
Admittedly, many new drugs are expensive, but it is good they are available in the first place. It is those prices, and the fact that drug companies can recover their large investment in the new drugs, that encourages their creation of the next round of innovative drugs. Without that incentive, fewer new drugs come to market, and fewer drug innovations make it to market.
While Pelosi keeps up her act, we should all see it for it is — a flunky’s distraction. Though I am hopeful that all of these bad ideas will flop as we head into another presidential campaign season, we at least need to focus on the real problems. We need to watch the magician instead of the stooge. There are real ways to increase patient access to new drugs, incentivize new drugs coming to market, and lower drug prices overall.
It doesn’t take magic or a flunky — just common sense.
Charles Sauer (@CharlesSauer) is a contributor to the Washington Examiner‘s Beltway Confidential blog. He is president of the Market Institute and previously worked on Capitol Hill, for a governor, and for an academic think tank.