CLSA Opposes New Dangerous Price Controls Proposal Threatening California’s Biopharmaceutical Innovation Ecosystem

By Jenny Nieto
Sept. 23, 2019

On Sept. 19, House Speaker Nancy Pelosi (D-San Francisco) unveiled legislation in the form of the Lower Drug Costs Now Act (H.R. 3), an unprecedented sweeping proposal that would transfer most domestic drug pricing decision-making to U.S. and European government bureaucrats, and eviscerate the free market model that has promoted innovation, cures and treatments for millions of patients.

This latest action demonstrates the troubling, growing bipartisan interest in using the dangerous concept of price controls as a mechanism for lowering list prices for pharmaceuticals in the U.S. You can view CLSA’s statement in opposition to H.R. 3 can be found here and tweeted here.

Specifically, H.R. 3 would do the following:

  • Requires the Secretary of Health and Human Services (HHS) to directly negotiate the price of 25 to 250 brand-name drugs annually that lack a generic or biosimilar competitor and have the greatest cost to Medicare and the U.S. health system. H.R. 3 would establish an upper limit for the price reached in any negotiation as no more than 120 percent of the volume-weighted average of the price of six countries (Australia, Canada, France, Germany, Japan, and the United Kingdom). This price is known as the Average International Market (AIM) price. The articulated goal of this policy is for HHS to negotiate a price that is below the AIM, called the “maximum fair price”, which would be applied to Medicare. Medicare Advantage and Part D plans could use additional tools to negotiate even lower prices.
  • Requires a manufacturer to offer the maximum price set by HHS to the commercial market. If a manufacturer does not agree with the maximum price, they will be assessed a penalty starting at 65% of the annual gross sales and increasing 10% every quarter to a maximum of 95%. If the manufacturer agrees to the maximum price, but overcharges Medicare or fails to offer the price to other payers, they are subject to a civil monetary penalty of 10 times the difference between the price charged and the maximum price. The bill would also establish a new inflation rebate for the more than 8,000 drugs in Medicare Parts B and D, retroactive to 2016, and the drug company can either lower the price or rebate the entire amount above inflation to the Treasury.
  • Creates a $2,000 out-of-pocket limit on Medicare Part D beneficiary prescription drug costs, beginning in 2022, and redesigns the program to have an initial coverage period and then catastrophic phase, effectively eliminating the coverage gap. However, the bill lowers the government’s exposure in the catastrophic phase from 80% to 20%, increases the insurers exposure from 20% to 50%, and increases manufacturer exposure from zero to 30%. Manufacturers would also be required to pay 10% in the initial coverage period. (Notably, this is a significant increase from the bipartisan Senate Finance Committee proposal, which would eliminate the coverage gap and have manufacturers pay 20% in the catastrophic phase.)

CLSA is deeply concerned about any proposal to transform Medicare Part B from a market-based payment formula to one based on artificially low and government-controlled foreign prices. Such plans largely ignore their impact on patient access, the development of new cures, and their threat to innovation.

For the past year, CLSA has actively engaged the Administration, Congress, national industry and trade association groups, our multi-state life sciences association partners, patient and provider groups, small and emerging business and manufacturing groups, academia, and the venture community to develop, coordinate, and express our deep concerns and opposition to proposals to enact foreign price controls. CLSA has also developed an aggressive and comprehensive strategic plan to organize our activities in opposition to foreign price controls. Our activities to date include: submitting detailed comments in response to the ANPRM, joining 338 other stakeholders on a letter to bipartisan House & Senate leadership, and initiating a grassroots advocacy campaign to encourage constituents to weigh in with their legislators in opposition to the proposal.

Additionally, CLSA President & CEO Mike Guerra penned an op-ed that was published last week in Morning Consult regarding the dangers of policymakers utilizing foreign price controls to lower drug costs. With growing bipartisan support for these proposals, CLSA is working to educate policymakers that importing price controls will do little to lessen the financial burden for patients. Rather, these short-sighted proposals will hinder access to needed treatments and discourage medical innovation in California and worldwide. Read or share the full op-ed published Sept. 20 in Morning Consult.

Please join us in urging Congress to reject foreign price controls and defend patient access in Medicare Part B.

Questions? Please contact Jenny Nieto, CLSA’s Vice President, Federal Government Relations & Alliance Development (