The Unacceptable Cost of H.R. 3—It Must Be Rejected
The Council of Economic Advisors just came out with a new analysis of H.R. 3, the “Lower Drug Costs Now Act of 2019.”
This bill seeks to lower prices for certain drugs by forcing drug manufacturers to accept prices set by the federal government or otherwise pay an excise tax of up to 95 percent of sales. Manufacturers would have to either accept the government’s price for a given drug or decline to sell it in the United States.
The Council of Economic Advisors conservatively estimates that H.R. 3 could result in as many as 100 fewer drugs entering the market over the next decade. This, in turn, would result in reduced population health and reduced life expectancy.
The economic value of the reduced population health and reduced life expectancy could reach $1 trillion per year over the next decade. What this means is that the cost of implementing H.R. 3 would be about double the savings that it would produce for drug consumers.
Even policymakers who support H.R. 3 admit that the bill would suppress drug innovation and result in fewer drugs coming to market. Drug companies typically spend 15 to 20 percent of their revenue on research and development. Thus, the estimated $500 billion to $1 trillion revenue decrease caused by H.R. 3 would probably result in a $75 billion to $200 billion reduction in research and development expenditures over the next decade.
In the 1980s, European investment in drug research was 24 percent higher than in the United States. But then, European officials decided to impose socialist price controls like the ones contained in H.R. 3. Today, European investment in drug research is 40 percent lower than American investment is.
What has this meant on a practical level? Price controls have resulted in far fewer breakthrough drugs being available to Europeans than to Americans. It is the major reason why the survival rates for cancer and other chronic illnesses are higher in the United States than in Europe.
It should be obvious to any observer of global healthcare policy that price controls are harmful to patients and harmful to the American economy. Members of Congress should have some understanding of the chilling effect that such policies have on innovation and investment in R&D. Yet, they are ignoring the global experience and has fallen into the trap of proposing price controls and a medicine tax on the U.S. healthcare system.
If passed into law, H.R. 3 would send the American healthcare system down the same muddy path that the Europeans have taken. Medical R&D would suffer, and American patients would die. It really is that simple.
H.R. 3 would not only result in lethal delays for patients seeking life-saving medicines, but it would also ensure that America steps away from leading the world in breakthrough medical innovation. H.R. 3 is not worth it.
Therefore, we urge Congress to scrap H.R. 3.