Three Ways a President Alone Can Rein In Prescription Drug Prices

High prescription prices are an industry problem, not a problem of "outliers" (source; click to enlarge)

by Gaius Publius

Along with many others, we recently wrote about Mylan's predatory price increases on the life-saving prescription drug product EpiPen. Then came the news that the interestingly named Valeant had increased the price of a prescription drug it had purchased, not developed, more than 2700%, apparently anticipating a growing lead poisoning crisis like the one in Flint, Michigan. ("Did your kids get sick from eating lead paint? We'll fix them right up ... for $27,000.")

At the end of the Valeant piece, I added a section that argued for an industry-wide — and Executive Branch-only — fix. Don't play Whack-a-Mole with individual companies, I argued. Whack drug prices industry-wide, or we'll always be chasing a shadow and fixing problems only when they're reported as scandals.

It turns out that Rep. Mark Pocan and a number of his colleagues have the same idea. From a letter Pocan wrote, and dozens of his colleagues signed, here are three specific suggestions that the next president can unilaterally enact, whoever she or he may be.

First, use existing statutory power to make sure that drugs developed in whole or in part by taxpayer funds are not monopoly-priced:

We believe your Administration should issue fair and transparent guidelines to ensure the public has access to lifesaving drugs developed using federally funded research. Specifically, you should instruct the Director of the National Institutes of Health to ensure that drugs researched and developed with taxpayer funds are kept accessible to the public by authorizing new competition for unaffordable, monopoly-priced medications—an existing statutory power granted by the Bayh-Dole Act (Pub. L. 96-517). This is an important step in deterring corporations from holding federally funded patented drugs from setting unreasonable prices.

This applies to a large number of drugs, by the way.

Second, there's existing authority to authorize prescription drug importation under some qualifications. Pocan, and frankly, the vast majority of the public, believes this authority should be used, and now.

Moreover, we also encourage your administration to explore implementing drug importation rules that are already part of U.S. law. Under authority from the Medicare Prescription Drug Improvement and Modernization Act of 2003, the Secretary of Health and Human Services can certify the importation of prescription drugs from other countries under specific qualifications. This regulatory action would pose no risk to public health and safety and could result in a significant reduction in the cost of prescription drugs to American families.

This authority, if used, should not be "triangulated" as a bargaining chip to negotiate just certain drug prices down. It should be applied as quickly, as broadly, and as aggressively as possible.

Put simply: The government is not in the business of making sure businesses make money — that's their job. The government has a Constitutional mandate to "promote the general welfare," the welfare, in other words, of the natural humans whose "consent of the governed" keeps that government in business.

(Remember the phrase "consent of the governed" and what it means. It's the ultimate source of any government's legitimacy. When a government is too captured and too corrupt to be tolerated, consent of the governed will inevitably be withdrawn. What happens next is too painful to contemplate, but once started, it's very hard to stop. In my view, we're nearer that point — the withdrawal of consent of the governed by large groups of people on both the left and the right — than anyone wishes to believe.)

Third, use authority that exists, but since Reagan, is almost never used, to curb monopolies (what used to be called violations of the "restraint of trade" prohibition):

We believe your administration also has the authority to address issues within the Federal Trade Commission [FTC] to more effectively combat monopolies held by pharmaceutical companies and the use of patent settlements to block all other generic drug competition for a growing number of branded drugs, also known as “pay-for-delay.” We are deeply concerned that pharmaceutical companies will continue this unethical and unlawful practice until necessary reforms are developed and implemented.

In the old days, the FTC was quite aggressive in blocking mergers and other monopolistic practices. Reagan simply stopped antitrust enforcement.

Capitalism without competition always leads to monopolies and oligarchies, and thanks to Reagan's refusal to maintain competition in our markets by enforcing the Sherman [Antitrust] Act, these formed in every major industry in America, from telecom to food and even the media.

Today, the Sherman Act is never used against the big boys. Big banks have grown out of control. Megastores like Walmart have wreaked havoc on local businesses, while telecom and cable companies like Comcast and AT&T have all of us in economic chains. Even our media has been consolidated.

Look at some of the companies that dominate the marketplace today. Google has 90% market share of internet search engines. Facebook has a 64% market share of social media sites. And Sirius/XM Radio has an astonishing 100% market share of satellite radio in this country.

The next president (and in fact, the current one, if he were so inclined) can fix that almost instantly. Of course, that president would need to understand her or his duty as being to the people (natural persons) and not to the profiteers.

But I have been told that this, by Hillary Clinton, is a reason for hope. So let's consider what Clinton proposes regarding prescription drug prices.

The Clinton Proposal and Its Problems

It's good that Hillary Clinton has a thoughtful proposal at her website (see link above) to address the problem of high prescription drug prices. The problem with the price aspect of the Clinton proposal (there are other aspects) is that it's mainly focused on "outlier" pricing, with this single exception:

Prohibit “pay for delay” arrangements that keep generic competition off the market. Hillary Clinton would prohibit “pay for delay” agreements that allow drug manufacturers to keep generic competition off of the market – lowering prices for Americans, and saving the government up to $10 billion.

Aside from that general action, none of the rest of what Rep. Pocan and his colleagues propose is included. For example, Clinton believes that Medicare should use its size to negotiate drug pricing down, but doesn't mention that this has been forbidden by Congress.

About prescription drug importation, the only mention is "emergency importation." Is the importation authority in the Pocan letter broader than just "emergency importation"? Perhaps; his letter doesn't address that point. But even so, each of the references to emergency importation in the Clinton proposal would be triggered by "outlier" pricing. The Pocan proposal would make importation the norm in the broadest sense allowed by law.

Lastly, the first Pocan proposal, using the Bayh-Dole Act, is not mentioned by Clinton at all.

It's imperative that Hillary Clinton and Donald Trump be put on the record now regarding these three specific proposals — now, before either enters the White House. Remember our Rule 47, which reminds us that we'll never have more leverage with candidates in a close race than before the vote is taken. That means we have not many days to press them both on this life-and-death issue.

GP