Pelosi tax extortion on drugs will end R&D, stop cures!

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House Speaker Nancy Pelosi seems intent on destroying the hope of those afflicted by cancer and other deadly diseases as legislation she is pushing under the guise of lowering drug prices will effectively create a potential financial cost for developing and inventing new life saving medicines.

The only available summary published of Pelosi’s H.R. 3 published by FDANews.com states, “If a manufacturer refuses to enter negotiations after being selected by the Secretary, or if the manufacturer leaves the negotiation before a maximum fair price is agreed to, then the manufacturer will be assessed an excise tax equal to 75 percent of annual gross sales in the prior year of the selected drug.”

Note that the coerced payment for a manufacturer who doesn’t agree to a lesser amount is “75 percent of annual GROSS sales in the prior year of the selected drug.”  This is not a tax on the profit, but instead is a tax on the overall sales, meaning that if a company sells a drug for $100, they owe a tax of $75 — no matter what profit they made. This means that the Pelosi prescription medicine tax can easily exceed 100 percent of profits.

What company in their right mind is going to invest in developing, testing and marketing the latest miracle cure when the federal government can punish the company for their success? In fact, since the proposed H.R. 3 only applies to the 250 brand-name drugs that “lack price competition with the greatest total cost to Medicare and the whole U.S. health system,” the financial incentive for any corporation is to limit the number of people who benefit from their latest medicines in order to avoid falling within the price extortion threshold.

Rather than encouraging the expanded availability of life saving drugs and biologics, instead the presumed unintended side-effect of the latest Democrat health care scheme would be to make these treatments less available and as a result of this exclusivity, even more costly.  

Anyone who remembers the Obama lie that if you like your health insurance, you can keep your health insurance, should be shuddering under the prospects of the Pelosi prescription drug promise that, “This steep, retroactive penalty creates a powerful financial incentive for drug manufacturers to negotiate and abide by the final price, while ensuring that patients maintain uninterrupted access to the medicines they need. The penalty gives the HHS Secretary leverage without resorting to a restrictive formulary and without the interruptions of contracting, building, and approving a whole new production line.”

Because the reality is that what the steep, retroactive excise tax penalty actually creates is a powerful incentive for manufacturers to ration cures to those who are willing to concierge health providers who serve the wealthiest Americans rather than put their entire companies at risk based upon a retroactive penalty that will likely exceed any profits they derive from it.

The other reality is that small and mid-size biologic and drug manufacturers would be unwilling to assume the costs associated with the marketing of their latest and greatest new meds, and as a result would be almost compelled to enter into agreements with pharmaceutical giants in order to protect themselves from being destroyed by a bureaucratic edict.

One of the truisms of government is that when you tax something, you get less of it. By taxing the 250 most common prescription medicines at rates approaching or exceeding 100 percent, the Pelosi prescription medicine tax will result in higher drug prices, rationing, and in the IRS inserting itself at your local drug store’s pharmacy section.

President Trump has worked hard to make medicines and treatments more available to patients through landmark “Right to Try” legislation which gives dying patients the chance at life through not fully tested medicines.  Destroying the companies who are creating these medicines ability to make a profit and offset research and development costs will undermine the ability of millions of Americans with cancer and other deadly or disabling diseases from having the latest hope for a cure at their disposal. 

Punishing those who are inventing hope is not the answer.  Congress and President Trump should reject H.R. 3, and just tell Speaker Pelosi no in her latest attempt to stymie the invention of cures here in America.

Rick Manning is the President of Americans for Limited Government. Reproduced with kind permission. Original can be viewed here.