The Unintended Consequences of Secretary Azar’s Prescription Drug Policy

The United States is the current leader in the development of innovative medicines worldwide.

The key to America’s exceptional pharmaceutical ecosystem is our country’s continued commitment to uphold and protect the exclusive rights of inventors to their discoveries as enshrined in the Constitution. We foster innovation through value-based incentives to encourage our greatest minds to pursue drug development despite uncertainty and substantial risk.

Pharmaceutical development remains a lengthy and costly undertaking. Estimated costs of developing a new prescription drug range between $1.5 billion and $2.5 billion, and only 12 percent of treatments in clinical trials ever reach patients. Acknowledging these substantial risks, we must promote policies that encourage innovation and provide the necessary incentives that American scientists and engineers require.

Unfortunately, America’s inventors have found themselves in the crossfire as Washington’s war on drug pricing continues to escalate. Recently, a salvo of harmful legislation was introduced from the likes of self-proclaimed socialist Sen. Bernie Sanders (I-Vt.) in Congress to “address” the cost of health care by implementing a laundry list of compulsory licensing tactics.

The simple, inescapable fact known by inventors, manufacturers and IP practitioners is that compulsory licensing is no more than government-sanctioned theft. Surprisingly, instead of defending America’s innovators from the anti-IP battle cries now commonplace in the halls of Congress, certain members of the Trump administration have embraced this populist fervor and are actively pushing to impose foreign price controls on domestic pharmaceutical drugs. Specifically, Alex Azar, secretary of Health and Human Services, has put forth a proposal that has the ability to singlehandedly cripple America’s number-one asset: our innovation economy.

Azar’s proposal overhauls the current value-based Medicare Part B drug payment model by tying domestic prices to an international pricing index comprised of 14 foreign countries. The countries selected for the index are what makes this proposal so troubling.

The vast majority of the IPI countries operate under single-payer socialized health care systems whose bureaucracies artificially diminish the price of drugs and use non-market mechanisms to impede patient access to medicines. This is no more than a backdoor method of bringing socialized medicine stateside.

The proposal fails to consider the real cost of importing price controls from countries that undervalue innovation, thereby undermining domestic intellectual property protection. Linking American pharmaceutical prices to those used in foreign countries will have long-standing effects on market uncertainty for venture capital, thereby reducing the critical funding it takes to bring new cancer medications (along with other drugs regulated under Medicare Part B) to market.

If we use price controls on pharmaceuticals, we limit the research budgets essential to the process of developing innovative new drugs and therapies. Importing foreign prices from historically bad actors who promote socialized medicine is not the path forward.

The sanctity of America’s IP system depends on upholding the free market and ensuring that inventors in the biopharmaceutical sector are protected from theft. The proposed IPI model would disincentivize the life-saving research and development of cures our nation relies on.

Instead of embracing IP-killing policies found overseas, which champion compulsory licensing, collective bargaining and foreign freeloading, let’s use market-based solutions to address the high cost of health care that acknowledges the research and development funding necessary for future innovations. President Donald Trump should support America’s continued leadership in global biopharmaceutical innovation and oppose Azar’s socialist price controls. The future of our health care is at stake.


Dee Stewart is president of the Center for Innovation and Free Enterprise.

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