H.R. 3 and Innovation

October 17, 2019 11:00 am

The U.S. House Committee on Ways and Means will mark up H.R. 3, Speaker Nancy Pelosi’s drug-pricing bill today. Committee members would do well to recall statements that witnesses and their colleagues on the House Energy Commerce and the House Education and Labor committees made in hearings last month on the legislation.


These individuals warned that H.R. 3 would have a significant, negative impact on the development of future cures.


No statement during those proceedings was more clarifying than the one from Energy and Commerce Committee Member Rep. Mike Burgess. The Texas congressman argued: “The release of such great human suffering is priceless. … We need to ensure that such payment mechanisms do not impede innovation.”


American Enterprise Institute economist Ben Ippolito testified that the pricing mechanisms written into H.R. 3 would impede innovation. He said, “By importing the pricing decisions of other countries, we are importing preferences over what is/isn’t worth paying” for and these opinions “may differ substantially from ours—particularly because these countries do not face the same downsides to setting prices too low.”


The downsides we face are declining dollars for research and development.


As Energy and Commerce Committee Member Congresswoman Susan Brooks (R-Ind.) this impact already has been felt in other countries have enacted price controls. Rep. Brooks noted: “Some of our peer nations often have access to fewer of the new drugs than here in the United States. Despite the lower costs, patients can’t access these life-saving drugs. If we share that same drug-pricing model, I worry this could become a reality in our country.”


Dr. Phil Roe, who now represents Tennessee’s first congressional district and is a member of the House Labor and Education Committee seemed to agree in his panel’s hearing the next day. Rep. Roe reminded his colleagues that “we, as a society, have to decide if we’re willing to sacrifice” innovation.


Surveys indicate that we are not, with Americans likely to reject drug-pricing proposals if they diminish research and development.


Congressman Roe also noted that one of his professors in medical school was working on a cure for sickle cell disease.


Almost 40 years later, Americans innovators still are working to find a cure. Companies like Global Blood Therapeutics are working to develop new treatments, but it is impossible to determine how far off a cure is or how much investment it will take to finally find one.


What we do know is that the recent Congressional Budget Office study of H.R. 3 acknowledged fewer cures and treatments would come to market if the bill becomes law – even if the legislation would save taxpayers money.


As Kellogg School of Management professor Craig Garthwaite explained, “We shouldn’t be surprised that drug price controls save a lot of money. The trade-offs don’t show up in the budget.”


Where would the trade-offs show up?


Rep. Tim Walberg (R-Mich.), who serves on the Education and Labor Committee, explained at that panel’s Sept. 26 hearing: H.R. 3 will put “breakthrough cures for diseases like Alzheimer’s, cancer, sickle cell anemia and others at risk.”