Douglas
Holtz-Eakin July 17, 2019
Reducing
the cost of prescription drugs is at the top of everyone’s policy wish list and
Congress has been understandably busy on this front. This effort has yielded a
welter of bills crafted by a number of committees on both sides of the Capitol.
To the casual observer, the result may appear to be an incoherent collection of
policy odds and ends. After all, what does the CREATES Act have to do with
provisions to clarify exclusivity rights for new chemical entities? CREATES
reforms the Risk Evaluation and Mitigation
Strategies (REMS) protocols to allow the entry of a generic
competitor by guaranteeing the generic manufacturer’s ability to obtain enough
samples of the brand-name drug to prove its product’s bioequivalence. In
contrast, the Senate HELP Committee’s S. 1895 returns to limiting
five-year exclusivity only to drugs containing no previously approved chemical
entity. In 2018, the Food and Drug Administration had permitted
fixed-combination products that had both a new and previously approved entity
to receive the full five years of exclusivity.
In
her review of
congressional drug pricing reform legislation, AAF’s Tara O’Neill Hayes points
out that these are both provisions intended to increase competition. Indeed,
greater competition is the unifying theme of the drug reform efforts. The
legislation takes three broad approaches to better competition: 1)
ending tactics that prevent competitors from entering a market (such as
those discussed above), 2) increasing transparency around pricing practices,
and 3) looking to lower the costs of developing new drugs.
This is,
of course, exactly the right strategy. On a bipartisan basis, Congress has
steered away from price controls (at least so far) and inefficient
attempts to provide taxpayer subsidies to drug purchasers. The latter is
already in place (e.g., the Part D program in Medicare); increasing
the subsidy would simply push up demand for drugs and the very prices
Congress would like to control.
It remains
to be seen if Congress can get legislation over its finish line and
through the obstacle course of presidential approval. But for now, at least,
the thrust of these efforts is on the right track.
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