Alex Hendrie

Democrats Are Playing Politics With Coronavirus Legislation

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Posted by Alex Hendrie on Wednesday, March 4th, 2020, 12:28 PM PERMALINK

Democrats are exploiting the Coronavirus epidemic in an effort to impose partisan, socialist price controls on lifesaving cures.

According to media reports, House Democratic leadership is proposing a Coronavirus emergency spending package legislation that includes price controls on any vaccine, therapeutic, or diagnostic developed to treat the disease.

Republicans in the House and Senate should reject this poison pill and ensure that medical innovation is protected in the supplemental legislation.

Manufacturers are acting swiftly to ensure the creation of Coronavirus cures. However, enacting price controls will suppress the research and development that is needed to create these cures. If this proposal is made into law, it will mean fewer cures and slower development. It could even lead to government rationing of Coronavirus cures, allowing the government to pick and choose who “deserves” a vaccine.

Price controls on Coronavirus cures will also set a precedent to put price controls on other lifesaving medicines, a long-held goal of the left. As recently as last year, Democrats passed a proposal to impose government prices on medicines under threat of a 95 percent excise tax on medicines.

This is the wrong approach to ensuring the development of Coronavirus cures and should be opposed by lawmakers.

Photo Credit: Steve Jurvetson


Senate Should Reject Legislation Undoing GILTI High-Tax Exemption

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Posted by Alex Hendrie on Monday, March 2nd, 2020, 2:27 PM PERMALINK

Senator Sherrod Brown (D-Ohio) and Finance Committee Ranking Member Ron Wyden (D-Ore.) have introduced legislation that would undo the existing high-tax exception (HTE) for the Global Intangible Low-Taxed Income (GILTI) provision. This will result in double taxation on American businesses operating overseas and undermine the Tax Cuts and Jobs Act (TCJA).

This legislation, S. 3280, the “Blocking New Corporate Tax Giveaways Act,” should be rejected by the Senate.

GILTI was created to prevent taxpayers from eroding the U.S. tax base by assigning income to low tax jurisdictions. However, the provision was designed based on the pre-TCJA tax system which required companies to allocate a portion of domestic expenses to foreign income calculations. This resulted in a post-TCJA tax code where American businesses faced additional foreign tax liability because GILTI inadvertently taxed high-tax foreign income that was previously exempt from U.S. taxation.

To resolve this problem, Treasury proposed rules that allow businesses to elect a high-tax exclusion for a Controlled Foreign Corporation’s (CFC) income if this income is subject to foreign taxes above 90 percent of the corporate rate (18.9 percent based on the 21 percent corporate rate). This HTE ensures the integrity of the new, territorial tax system in a way that protects the U.S. tax base without subjecting taxpayers to double taxation or creating perverse incentives for businesses to restructure.

This legislation is particularly egregious because Congress clearly intended to exclude high tax foreign income from GILTI, as the conference report to accompany the TCJA clearly stated: 

“The Committee believes that certain items of income earned by CFCs should be excluded from the GILTI, either because they should be exempt from U.S. tax – as they are generally not the type of income that is the source of base erosion concerns – or are already taxed currently by the United States. Items of income excluded from GILTI because they are exempt from U.S. tax under the bill include foreign oil and gas extraction income (which is generally immobile) and income subject to high levels of foreign tax.”

The existing high-tax exception should be preserved, not repealed as proposed by Senators Brown and Wyden. Repeal would increase taxes on businesses and undermine the integrity of the Tax Cuts and Jobs Act.

Photo Credit: New America - Flickr


ATR Releases Letter Opposing Importation Of Prescription Drugs From Canada

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Posted by Alex Hendrie on Monday, March 2nd, 2020, 11:00 AM PERMALINK

Americans for Tax Reform President Grover Norquist has released a letter to FDA Commissioner Stephen Hahn urging him to withdraw a proposal that would allow the U.S. to import prescription drugs from Canada. 

[Read the full letter here]

Importation proposals do not address the root cause of high prices, and it is unclear whether this proposal will result in any meaningful savings to consumers or increase access to medicines.

Canada does not have the scale to successfully import drugs to the U.S. As the letter notes: 

Canada is roughly one-tenth the size of the U.S. with a population of 37.5 million and an economy of $1.7 trillion. By comparison, the U.S. has a population of 327 million and an economy of $20.5 trillion. 

Given the disparity in size between the two countries, Canada does not have the scale to effectively import drugs to the U.S. In fact, this proposal may destabilize the Canadian supply chain, a concern raised publicly by Canadian officials.

Even if Canada had the scale to import prescription drugs to the U.S., many innovative medicines that are available to U.S. consumers could not be imported because they are not available in the Canadian market. As the letter notes: 

Of the 290 new medical substances were launched across the world between 2011 and 2018, the U.S. had access to 90 percent of these cures, far exceeding other markets. Canada has access to just 44 percent of cures, but it is far from an outlier. The United Kingdom had 60 percent of medicines, Japan had 50 percent, and Ireland had just 40 percent.

It is unclear whether or not there will be savings from importation. The non-partisan Congressional Budget Office (CBO) has previously estimated that importing drugs from Canada would have a “negligible reduction in drug spending.”

There are also long-standing concerns that importation will flood the U.S. market with unsafe, unvetted drugs. Every single FDA Commissioner and HHS Secretary over the past two decades have raise concerns about importation and declined to vouch for its safety. 

Current HHS Secretary Alex Azar is no exception –– in 2018, he called the proposal a “gimmick” and labeled importation as “open borders for unsafe drugs in search of savings that can’t be safely achieved.”

Finally, importing Canadian drugs is not a free trade measure –– it will import price controls. As the letter notes: 

Free trade means a level playing field where prices are set by the market with no tariffs, barriers, or price controls. Drug importation is the opposite of free trade because foreign countries frequently utilize a range of arbitrary and market-distorting policies to determine the cost of medicines – by definition such approaches are price controls.

Proposals to import Canadian medicines into the U.S. should be opposed. Canada does not have the scale to import drugs to the U.S., the Canadian drug market has far less access to medicine than the American market, the proposal would likely not generate consumer savings, and it would import foreign price controls into the U.S. 

Read the full letter here.

Photo Credit: Flickr- wp paarz


Dem Plan to Reimpose Obamacare Tax Will Hit Trump Districts Hard

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Posted by Alex Hendrie on Monday, February 24th, 2020, 2:06 PM PERMALINK

Democrats want to bring the Obamacare individual mandate tax back from the dead and impose it on taxpayers in every Congressional district.

There are 30 Congressional districts that President Trump won in 2016 that are currently represented by Democrats.

These Trump-district Democrats have repeatedly opposed tax cuts and regulatory reform pushed by Republicans, instead siding with House Speaker Nancy Pelosi in pushing for higher taxes and more regulations.

Before Republicans repealed it in 2017 as part of the Tax Cuts and Jobs Act, the individual mandate was one of the most regressive taxes in the code. The mandate forced individuals to purchase government approved health insurance or pay a tax totaling almost $700 for an individual and $2,000 for a family.

Repeal of the hated Obamacare tax has provided relief for low- and middle-income households:

  • In 2017, the Obamacare individual mandate tax hit 4,654,990 households.
  • 75 percent of those paying the mandate had annual income of less than $50,000 and 32 percent had annual income of less than $25,000. 

 

Americans for Tax Reform has run the numbers on what re-imposing the individual mandate tax in the 30 Trump districts would mean for these taxpayers. The results are consistent across the board: the tax disproportionately targets low- and middle-income families and individuals.


[View ATR's breakdown of the most recent IRS individual mandate tax penalty data for every Congressional district

Here is the breakdown for the 2016 Trump Districts that currently have Democrat Representatives: 

Tom O’Halleran’s district (AZ-01)

  • 7,660 households paid the Obamacare Individual Mandate Tax in 2017.
  • 2,480 of those households, or 32 percent, had annual income of less than $25,000.
  • 5,640 of those households, or 74 percent, had annual income of less than $50,000. 
  • In the 2016 election, 63 percent of the district voted for Trump.

 

Lucy McBath’s district (GA-06)

  • 9,070 households paid the Obamacare Individual Mandate Tax in 2017.
  • 2,380 of those households, or 26 percent, had annual income of less than $25,000.
  • 6,090 of those households, or 67 percent, had annual income of less than $50,000.
  • In the 2016 election, 48 percent of the district voted for Trump.

 

Lauren Underwood’s district (IL-14)

  • 7,610 households paid the Obamacare Individual Mandate Tax in 2017.
  • 2,200 of those households, or 28 percent, had annual income of less than $25,000.
  • 5,290 of those households, or 69 percent, had annual income of less than $50,000.
  • In the 2016 election, 49 percent of the district voted for Trump.

 

Cheri Bustos’ district (IL-17)

  • 8,830 households paid the Obamacare Individual Mandate Tax in 2017.
  • 3,490 of those households, or 40 percent, had annual income of less than $25,000.
  • 7,160 of those households, or 81 percent, had annual income of less than $50,000.
  • In the 2016 election, 47 percent of the district voted for Trump.

 

Abby Finkenauer’s district (IA-01)

  • 8,930 households paid the Obamacare Individual Mandate Tax in 2017.
  • 3,080 of those households, or 34 percent, had annual income of less than $25,000.
  • 7,070 of those households, or 79 percent, had annual income of less than $50,000.
  • In the 2016 election, 48 percent of the district voted for Trump.

 

Dave Loebsack’s district (IA-02)

  • 9,160 households paid the Obamacare Individual Mandate Tax in 2017.
  • 3,340 of those households, or 36 percent, had annual income of less than $25,000.
  • 7,350 of those households, or 80 percent, had annual income of less than $50,000.
  • In the 2016 election, 49 percent of the district voted for Trump.

 

Cindy Axne’s district (IA-03)

  • 10,370 households paid the Obamacare Individual Mandate Tax in 2017.
  • 3,340 of those households, or 32 percent, had annual income of less than $25,000.
  • 8,070 of those households, or 78 percent, had annual income of less than $50,000.
  • In the 2016 election, 48 percent of the district voted for Trump.

 

Jared Golden’s district (ME-02)

  • 12,780 households paid the Obamacare Individual Mandate Tax in 2017.
  • 3,820 of those households, or 30 percent, had annual income of less than $25,000.
  • 9,770 of those households, or 76 percent, had annual income of less than $50,000.
  • In the 2016 election, 51 percent of the district voted for Trump.

 

Elissa Slotkin’s district (MI-08)

  • 8,290 households paid the Obamacare Individual Mandate Tax in 2017.
  • 3,060 of those households, or 37 percent, had annual income of less than $25,000.
  • 6,400 of those households, or 77 percent, had annual income of less than $50,000.
  • In the 2016 election, 51 percent of the district voted for Trump.

 

Haley Stevens’ district (MI-011)

  • 8,260 households paid the Obamacare Individual Mandate Tax in 2017.
  • 2,710 of those households, or 33 percent, had annual income of less than $25,000.
  • 6,080 of those households, or 74 percent, had annual income of less than $50,000.
  • In the 2016 election, 49 percent of the district voted for Trump.

 

Angie Craig’s district (MN-02)

  • 7,810 households paid the Obamacare Individual Mandate Tax in 2017.
  • 2,130 of those households, or 27 percent, had annual income of less than $25,000.
  • 5,640 of those households, or 72 percent, had annual income of less than $50,000.
  • In the 2016 election, 46 percent of the district voted for Trump.

 

Collin C. Peterson’s district (MN-07)

  • 9,200 households paid the Obamacare Individual Mandate Tax in 2017.
  • 2,700 of those households, or 29 percent, had annual income of less than $25,000.
  • 6,940 of those households, or 75 percent, had annual income of less than $50,000.
  • In the 2016 election, 61 percent of the district voted for Trump.

 

Susie Lee’s district (NV-03)

  • 13,390 households paid the Obamacare Individual Mandate Tax in 2017.
  • 3,970 of those households, or 30 percent, had annual income of less than $25,000.
  • 9,340 of those households, or 70 percent, had annual income of less than $50,000.
  • In the 2016 election, 48 percent of the district voted for Trump.

 

Chris Pappas’ district (NH-01)

  • 12,150 households paid the Obamacare Individual Mandate Tax in 2017.
  • 3,670 of those households, or 30 percent, had annual income of less than $25,000.
  • 9,080 of those households, or 75 percent, had annual income of less than $50,000.
  • In the 2016 election, 48 percent of the district voted for Trump.

 

Josh Gottheimer’s district (NJ-05)

  • 9,220 households paid the Obamacare Individual Mandate Tax in 2017.
  • 2,590 of those households, or 28 percent, had annual income of less than $25,000.
  • 6,180 of those households, or 67 percent, had annual income of less than $50,000.
  • In the 2016 election, 49 percent of the district voted for Trump.

 

Mikie Sherill’s district (NJ-11)

  • 7,340 households paid the Obamacare Individual Mandate Tax in 2017.
  • 1,880 of those households, or 26 percent, had annual income of less than $25,000.
  • 4,730 of those households, or 64 percent, had annual income of less than $50,000.
  • In the 2016 election, 49 percent of the district voted for Trump.

 

Xochitl Torres Small’s district (NM-02)

  • 9,820 households paid the Obamacare Individual Mandate Tax in 2017.
  • 3,180 of those households, or 33 percent, had annual income of less than $25,000.
  • 4,090 of those households, or 42 percent, had annual income of less than $50,000.
  • In the 2016 election, 50 percent of the district voted for Trump.

 

Max Rose’s district (NY-11)

  • 9,640 households paid the Obamacare Individual Mandate Tax in 2017.
  • 2,900 of those households, or 30 percent, had annual income of less than $25,000.
  • 6,950 of those households, or 31 percent, had annual income of less than $50,000.
  • In the 2016 election, 53 percent of the district voted for Trump.

 

Sean Patrick Maloney’s district (NY-18)

  • 7,660 households paid the Obamacare Individual Mandate Tax in 2017.
  • 2,380 of those households, or 31 percent, had annual income of less than $25,000.
  • 5,570 of those households, or 73 percent, had annual income of less than $50,000.
  • In the 2016 election, 49 percent of the district voted for Trump.

 

Antonio Delgado’s district (NY-19)

  • 9,050 households paid the Obamacare Individual Mandate Tax in 2017.
  • 3,050 of those households, or 34 percent, had annual income of less than $25,000.
  • 7,040 of those households, or 78 percent, had annual income of less than $50,000.
  • In the 2016 election, 50 percent of the district voted for Trump.

 

Anthony Brindisi’s district (NY-22)

  • 7,940 households paid the Obamacare Individual Mandate Tax in 2017.
  • 3,190 of those households, or 40 percent, had annual income of less than $25,000.
  • 6,520 of those households, or 82 percent, had annual income of less than $50,000.
  • In the 2016 election, 54 percent of the district voted for Trump.

 

Kendra Horn’s district (OK-05)

  • 12,000 households paid the Obamacare Individual Mandate Tax in 2017.
  • 3,540 of those households, or 30 percent had annual income of less than $25,000.
  • 8,910 of those households, or 74 percent, had annual income of less than $50,000.
  • In the 2016 election, 53 percent of the district voted for Trump.

 

Matt Cartwright’s district (PA-08)

  • 7,860 households paid the Obamacare Individual Mandate Tax in 2017.
  • 2,410 of those households, or 31 percent, had annual income of less than $25,000.
  • 5,730 of those households, or 73 percent, had annual income of less than $50,000.
  • In the 2016 election, 53 percent of the district voted for Trump.

 

Conor Lamb’s district (PA-17)

  • 9,180 households paid the Obamacare Individual Mandate Tax in 2017.
  • 3,610 of those households, or 39 percent, had annual income of less than $25,000.
  • 7,430 of those households, or 81 percent, had annual income of less than $50,000.
  • In the 2016 election, 49 percent of the district voted for Trump.

 

Joe Cunningham’s district (SC-01)

  • 10,570 households paid the Obamacare Individual Mandate Tax in 2017.
  • 2,990 of those households, or 28 percent, had annual income of less than $25,000.
  • 7,650 of those households, or 72 percent, had annual income of less than $50,000.
  • In the 2016 election, 53 percent of the district voted for Trump.

 

Ben McAdams’ district (UT-04)

  • 14,100 households paid the Obamacare Individual Mandate Tax in 2017.
  • 3,760 of those households, or 27 percent, had annual income of less than $25,000.
  • 10,210 of those households, or 72 percent, had annual income of less than $50,000.
  • In the 2016 election, 39 percent of the district voted for Trump.

 

Elaine Luria’s district (VA-02)

  • 8,960 households paid the Obamacare Individual Mandate Tax in 2017.
  • 2,740 of those households, or 31 percent, had annual income of less than $25,000.
  • 6,780 of those households, or 76 percent, had annual income of less than $50,000.
  • In the 2016 election, 48 percent of the district voted for Trump.

 

Abigail Spanberger’s district (VA-07)

  • 10,110 households paid the Obamacare Individual Mandate Tax in 2017.
  • 2,980 of those households, or 29 percent, had annual income of less than $25,000.
  • 7,380 of those households, or 73 percent, had annual income of less than $50,000.
  • In the 2016 election, 50 percent of the district voted for Trump.

 

Don Beyer’s district (WA-08)

  • 11,120 households paid the Obamacare Individual Mandate Tax in 2017.
  • 2,630 of those households, or 24 percent, had annual income of less than $25,000.
  • 7,020 of those households, or 63 percent, had annual income of less than $50,000.
  • In the 2016 election, 45 percent of the district voted for Trump.

 

Ron Kind’s district (WI-03­­­­­­­­)

  • 10,780 households paid the Obamacare Individual Mandate Tax in 2017.
  • 3,440 of those households, or 32 percent, had annual income of less than $25,000.
  • 8,540 of those households, or 79 percent, had annual income of less than $50,000.
  • In the 2016 election, 49 percent of the district voted for Trump.

Photo Credit: Flickr - Matt Johnson


Dems Want To Reimpose Obamacare Individual Mandate Tax On Millions

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Posted by Alex Hendrie, Tom Hebert on Tuesday, February 18th, 2020, 12:30 PM PERMALINK

The Democrat effort to repeal the Trump tax cuts would re-impose the Obamacare individual mandate tax penalty on millions of households, hitting thousands of families in every state and Congressional district.

Americans for Tax Reform has broken down the most recent IRS data on the individual mandate tax penalty by Congressional district, which you can view here.

The individual mandate was one of the most regressive taxes in the code before it was repealed in 2017 by the Republican passed Tax Cuts and Jobs Act. Every single Democrat in the House and Senate voted against the repeal of the Obamacare individual mandate tax. 

Prior to repeal, the mandate forced households to purchase government approved health insurance or pay a $695 tax for an individual and $2,085 for a family.

Reinstatement of this tax will hit low and middle-income families hard.

In 2017, the tax hit 4,654,990 households according to IRS data. Nationwide, roughly 74 percent of those paying the mandate had annual income of less than $50,000 and roughly 32 percent had annual income of less than $25,000. 

Key swing states that President Trump won in 2016 would be hard-hit if the Democrats reimposed the individual mandate tax penalty. 

In Pennsylvania, the tax hit 153,140 households. 

  • 56,490 of those households, or 37 percent, had annual income of less than $25,000. 
  • 121,100 of those households, or 79 percent, had annual income of less than $50,000.


In Wisconsin, the tax hit 80,240 households. 

  • 24,550 of those households, or 31 percent, had annual income of less than $25,000. 
  • 62,440 of those households, or 78 percent, had annual income of less than $50,000. 


In Michigan, the tax hit 132,750 households. 

  • 50,920 of those households, or 38 percent, had annual income of less than $25,000. 
  • 106,910 of those households, or 81 percent, had annual income of less than $50,000. 
     

Here is the breakdown from some notable House members: 

In Ways and Means Ranking Member Rep. Kevin Brady's district (R-Texas), 13,880 households paid the Obamacare individual mandate tax penalty in 2017.

  • 3,270 of those households, or 24 percent, had annual income of less than $25,000.
  • 8,900 of those households, or 64 percent, had annual income of less than $50,000. 
     

In Ways and Means Chairman Rep. Richard Neal’s district (D-Mass.), 10,140 households paid the Obamacare individual mandate tax penalty in 2017.

  • 3,390 of those households, or 33 percent, had annual income of less than $25,000.
  • 8,060 of those households, or 79 percent, had annual income of less than $50,000. 
     

In House Speaker Rep. Nancy Pelosi’s district (D-Calif.), 9,700 households paid the Obamacare individual mandate tax penalty in 2017.

  • 2,280 of those households, or 24 percent, had annual income of less than $25,000.
  • 6,050 of those households, or 62 percent, had annual income of less than $50,000. 
     

In House Minority Leader Kevin McCarthy’s district (R-Calif.), 8,000 households paid the Obamacare individual mandate tax penalty in 2017.

  • 2,530 of those households, or 32 percent, had annual income of less than $25,000.
  • 5,870 of those households, or 73 percent, had annual income of less than $25,000. 
     

[View ATR's breakdown of the most recent IRS individual mandate tax penalty data by Congressional district

Photo Credit: Nancy Pelosi - Flickr


Rep. Harris Leads Letter Against Price Controls

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Posted by Alex Hendrie, Tom Hebert on Tuesday, February 18th, 2020, 10:15 AM PERMALINK

Congressman Andy Harris (R-Md.) recently led a letter opposed to price controls as a solution to surprise medical billing.

The letter was signed by 38 other members including House Freedom Caucus Chairman Andy Biggs (R-Ariz.), House Judiciary Committee Ranking Member Jim Jordan (R-Ohio), Republican Study Committee Chairman Mike Johnson (R-La.), and House Oversight Committee Ranking Member Mark Meadows (R-N.C.).

Rep. Harris and all signers should be commended for standing against price controls.

ATR has long opposed policies that directly or indirectly impose price controls on the US healthcare system. Price controls are bad policy because they utilize government power to forcefully lower costs in a way that distorts the economically efficient behavior and natural incentives created by the free market.

In the context of surprise billing, some lawmakers have proposed using rate-setting for any payments made to out-of-network providers. Under this system, the government would set a benchmark rate to resolve out-of-network payment disputes between insurers and providers. Benchmark rate-setting would replace private negotiations between insurers and providers with government-set prices, a blatant price control on the healthcare system. 

The signers explained the numerous problems with using rate-setting to address surprise billing, noting: 

“...we oppose price controls as a solution to the issue as a solution to the issue of surprise medical billing. By design, placing such price controls on purely private transactions, would reduce access to care, increase the power of the federal government, and result in negative unintended consequences.” 

Signers also acknowledged that while Congress should act on surprise billing, any legislation that includes price controls would be a nonstarter. As the letter states: 

“Congress should act on surprise medical billing, but it should avoid top-down price controls that would simply be trading one problem for another.” 

Conservative lawmakers have consistently expressed significant opposition to price fixing mechanisms within healthcare. For instance, 192 Republicans opposed H.R. 3, legislation that would impose price controls on pharmaceutical innovation under threat of a 95 percent excise tax.

Lawmakers need to take a serious, deliberative approach in addressing surprise billing instead of rushing to pass a flawed proposal that imposes price controls on our healthcare system. 

Thankfully, conservative lawmakers are standing firm in advocating against surprise billing proposals that rely on distortionary price fixing mechanisms. 

Photo Credit: Gage Skidmore


White House Report Highlights Foreign Freeloading of American Medical Innovation

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Posted by Alex Hendrie on Monday, February 17th, 2020, 4:32 PM PERMALINK

Foreign countries are freeloading off American medical innovation according to a recent report by the White House Council on Economic Advisers. 

Because of foreign price controls, the prices paid by other countries for pharmaceuticals is less than what is needed to incentivize the development of innovative new medicines. This harms foreign countries through lack of access to new medicines and harms the U.S. because prices are higher than they would otherwise be.

The U.S. healthcare system largely relies on free market forces that promote competition between various stakeholders. In comparison, most foreign developed countries utilize price controls to forcefully lower costs. In many cases, these countries are able to strong arm manufacturers into accepting lower prices, as the report notes: 

“In the U.S., private insurance plans compete and make decisions that reflect the value to pharmacy benefit managers or individuals selecting plans. In contrast, if a government-run monopoly plan’s employees decide not to cover a drug, there is no risk of losing a customer because the customers cannot leave. Moreover, drug companies would often rather sell drugs at prices below the value of their products than not sell at all.”

However, this does not come without costs. By relying on price controls, these developed countries have far fewer innovative cures than the U.S. In some cases, there is a wide disparity in terms of available treatments, as the report notes:

“[M]any of the 200 top-selling drugs examined here show no quantities sold in the countries of comparison, suggesting that those drugs are not available for sale in that country. For example, in Australia, only 97 of the 200 drugs show evidence of significant sales. Similarly, Canada has only 120 of the drugs, France 109, and Germany 133.”

Where prices are artificially lower in other countries, this indirectly harms American patients and taxpayers, who shoulder a greater share of the cost of innovative medicines than they are consuming. As the report notes, this problem is increasing:

“[F]or the past 15 years, stringent government underpricing in foreign countries has substantially increased foreign free-riding on the United States. Our main finding is that prices are much lower in other developed nations than would have been predicted by income differences alone and that this discrepancy is substantially widening.”

The fact is, developing new medicines is a complex, time consuming process. A manufacturer must invest a substantial amount in research and development. In addition, the clinical development and approval times average 90.3 months for a pharmaceutical drug and 97.3 months for a biologic. Given this extensive process, there is a clear linkage between the ability of manufacturers to recoup their investment and their willingness to innovate, as the report notes:

“The gains from global sales of innovative products drive incentives for research and development, which means that the challenge of financing global biopharmaceutical R&D poses a public-goods problem.”

Some proposals, like Speaker Nancy Pelosi’s plan to impose a 95 percent excise tax on manufacturers that don’t accept government price setting, or the International Pricing Index to tie U.S. prices to prices in foreign countries, would lead to the U.S. adopting the same pricing schemes that underpay for innovation.

Not only will this harm American patients in the form of fewer treatments and worse health outcomes, it will also harm the economy because of a decline in American R&D.

Manufacturers invest over $100 billion in the U.S. economy every year, directly supporting over 800,000 jobs. When indirect jobs are included, this innovation supports 4 million jobs and $1.1 trillion in total economic impact. Pharmaceutical jobs are also high paying – the average compensation is over $126,000 – more than double the $60,000 average compensation in the U.S.

If the U.S. implements the same price controls as those utilized in other countries, these jobs will be threatened. Medical innovation will be curtailed, reducing access to medicines in the U.S. and abroad. 

Rather than adopting these proposals, lawmakers should prioritize proposals that protect the free market and medical innovation and ensure that foreign countries pay their fair share.

Photo Credit: Jim Grey


ATR Supports The “Strengthening Innovation In Medicare and Medicaid Act”

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Posted by Alex Hendrie on Thursday, February 13th, 2020, 12:00 PM PERMALINK

Congresswoman Terri Sewell (D-Ala.) and Congressman Adrian Smith (R-NE) recently introduced important legislation to rein in the Center for Medicare and Medicaid Innovation (CMMI). This legislation, H.R. 5741, the “Strengthening Innovation in Medicare and Medicaid Act,” is cosponsored by Reps. Tony Cardenas (D-CA), John Shimkus (R-Ill.), Kurt Schrader (D-Ore), and Brad Wenstrup (R-Ohio).

These members should be applauded for introducing this legislation. Additionally, all members of Congress should support and co-sponsor this legislation.

CMMI was created under Obamacare with the goal of increasing efficiency of healthcare programs. The agency was tasked with conducting demonstrations over new health care delivery and payment models in Medicare, Medicaid, and the Children’s Health Insurance Program with the intent of reducing healthcare costs.

However, in its relatively short history, CMMI has pushed demonstrations with little evidence they would result in savings, while strong-arming healthcare providers and patients into participating.

The agency is also not under the normal appropriations process – Obamacare gave CMMI $10 billion every decade in perpetuity. As a result, Congress is limited in its ability to conduct routine, necessary oversight.

H.R. 5741 would help bring much needed oversight to CMMI through the imposition of several guardrails. For instance, the legislation would:

  • Require a public notice and comment process for any new demonstration. There are currently no requirements for public input.
  • Create a privileged process for Congress to block the implementation of a demonstration within 45 days of a proposed expansion from Phase 1 to Phase 2. 
  • Set limitations on any demonstration including requiring a test to be no longer than five years and only as many participants as necessary to obtain a statistically valid sample.
  • Allow providers and suppliers to opt-out a demonstration if it would cause undue economic hardship. 
  • Require monitoring of the impact any demonstration is having on beneficiaries and health disparities.
     

These reforms are a good first step towards reining in CMMI by providing much needed transparency, congressional oversight and stakeholder engagement. 

Photo Credit: Kevin Simmons


Senate Should Reject Drug Price Control Legislation

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Posted by Alex Hendrie on Wednesday, February 12th, 2020, 8:00 AM PERMALINK

Recent reports indicate that the Senate may consider the Prescription Drug Pricing Reduction Act (PDPRA) in the coming months. This legislation that would impose another price-setting mechanism on the U.S. healthcare system. 

While supporters continue to call for full Senate consideration of this proposal, lawmakers should reject the PDPRA. The bill disrupts the existing structure of Medicare Part D and does nothing to directly help seniors.

The PDPRA imposes an inflationary rebate penalty on Medicare Part D drugs. This provision would force manufacturers to pay the government a 100 percent fee when the list price of a drug increases faster than inflation.

This provision is problematic because Part D is a system that relies on competition between several stakeholders, namely pharmacy benefit managers (PBMs), insurers, and drug manufacturers. The penalty is imposed on one Part D stakeholder, the drug manufacturer, after the price has been negotiated between several stakeholders. Essentially, the government is handcuffing the ability of manufacturers to negotiate on a level playing field with insurers and PBMs.

The Proposal Undermines Part D Competition

Some PDPRA supporters claim that this policy is nothing more than the government placing a cap on the subsidies that manufacturers receive. This is misguided –– the federal government does not pay subsidies to drug manufacturers.

The government makes payments to insurers based on the negotiated price of a drug which includes substantial discounts off the list price. In actuality, this policy will disrupt existing negotiation in Part D. In fact, as noted by Doug Badger, this policy is “at odds with the Part D program’s reliance on private entities to negotiate discounts on behalf of seniors.”

Instead of having the government directly provide care, Medicare Part D leverages competition between pharmacy benefit managers (PBMs), pharmaceutical manufacturers, plans, and pharmacies to provide coverage to seniors. This lowers costs and maximizes access for seniors.

At the core of this program is the non-interference clause which prevents the Secretary of Health and Human Services (HHS) from interfering with the robust private-sector negotiations. The Congressional Budget Office has even said that there would be a “negligible effect” on Medicare drug spending from ending non- interference.

This structure has been successful in driving down costs. Since it was first created, federal spending has come in 45 percent below projections - the CBO estimated in 2005 that Part D would cost $172 billion in 2015, but it has cost less than half that – just $75 billion. Monthly premiums are also just half the originally projected amount, while 9 in 10 seniors are satisfied with the Part D drug coverage.

Existing Part D Negotiation Already Protects Against Price Increases

“Price protection rebates” negotiated between PBMs and manufacturers are an example of existing Part D negotiation. Today, almost 100 percent of medicines are subject to these rebates.

Under these agreements, any price increase past a predetermined threshold results in increased rebates from the manufacturers to the PBM.

In effect, this establishes a private sector ceiling or cap on the amount by which the price of a medication can increase.

On the other hand, the inflationary rebate penalty could create a perverse incentive for manufacturers to automatically increase the list price of their drugs each year to keep pace with inflation. 

There is Strong Opposition from Conservative Groups and Senators

While supporters of PDPRA claim that the bill is bipartisan, there is significant opposition on the right.

An amendment to strip out the inflationary rebate penalty – the key provision of PDPRA – was supported by 13 out of 15 Republican Senators on the Finance Committee when it was offered in July.

The amendment was offered by Senator Pat Toomey (R-Pa.) and supported by Senators Mike Crapo (R-Idaho), Pat Roberts (R-Kan.), Mike Enzi (R-Wyo.), John Cornyn (R-Texas), John Thune (R-S.D.), Johnny Isakson (R-Ga.), Rob Portman (R-Ohio), Tim Scott (R-S.C.), James Lankford (R-Okla.), Steve Daines (R-Mont.), and Todd Young (R-Ind.)

There is also strong opposition from conservative groups. Almost 20 conservative groups including ATR wrote in opposition to PDPRA when the legislation was released in July. 

The Rebate Penalty Does Nothing to Directly Help Seniors

Not only is the proposal unpopular and disruptive to Part D, it would do little to directly help reduce seniors drug costs. Any revenue generated from this penalty goes directly into government coffers, not to seniors that may need help affording their medicines.

The proposal may actually have the opposite effect of crowding out the existing rebates and discounts which flow through to patients. 

In sum, the inflationary rebate penalty imposes a price-fixing mechanism into the Medicare Part D system by forcing manufacturers to pay a 100 percent fee if the list price of a drug increases faster than inflation. The revenue generated from this penalty would go straight to the government, and would do nothing to directly reduce drug costs. Congress should reject the PDPRA.

Photo Credit: Flickr


Democrats Are Wrong to Criticize the 21 Percent Corporate Rate

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Posted by Alex Hendrie on Tuesday, February 11th, 2020, 8:00 AM PERMALINK

Democrats have wrongly argued that the Tax Cuts and Jobs Act has enabled corporations to avoid paying their taxes. Far-left politicians like Representative Alexandria Ocasio Cortez (D-NY) and self-avowed socialist Bernie Sanders (I-Vt.) have repeatedly raised this point.

Democrats on the Ways and Means Committee are now following this theme with a hearing called “The Disappearing Corporate Income Tax.”

There are two fundamental problems with the Democrat criticism. First, Democrats ignore the many benefits to workers and the economy from the Trump Tax Cuts. Secondly, they ignore the simple reason that some corporations are paying less than the statutory 21 percent rate – the existence of numerous credits and deductions that are designed to promote investment and job creation.

It is also important to note that companies are not using “loopholes” to lower their tax liability. They are following the law exactly as written and are paying state and local taxes as well as payroll taxes – sometimes totaling billions of dollars per year. 

Many of the tax provisions that lower corporations’ effective rates are non-controversial and have bipartisan support. For instance, businesses are currently allowed to immediately deduct the cost of business assets purchased. This provision, known as full business expensing, has been supported by the Obama White House. In fact, as noted in an Obama White House document, expensing is designed to lower the effective tax rate of a business:

“A policy of allowing an immediate deduction (or ‘expensing of investment costs’) has an alternative rationale, which is to lower the effective tax rate on income derived from business investments, and thereby encourage additional demand for capital goods.”

The Organisation for Economic Co-operation and Development (OECD) has recognized that full business expensing increases GDP.  

Similarly, the R&D credit was first created under President Reagan as a temporary provision and was extended by Congress more than a dozen times. It was made permanent in 2015 on a bipartisan basis and was signed into law by President Obama.

In advocating for this provision, the Obama White House noted that every $1 in tax reduction from the R&D credit creates $2 in benefits to the economy and that 80 percent of the credit is directly attributable to salaries of U.S. workers performing U.S. based research.

While the tax cuts did lower the corporate rate from 35 percent to 21 percent, this brought the U.S. rate in line with the rest of the developed world. The U.S. rate is 25.89 percent after accounting for the state corporate tax, while the average rate in the 36-country OECD is 23.52 percent.

This tax cut has also benefited the American economy and workers. Businesses have created 100,000 jobs in 34 of the 38 months that Trump has been President and the unemployment rate has been below 4 percent for 23 consecutive months. Wage growth has been at or above 3 percent for the past 18 months, according to the Bureau of Labor Statistics (BLS).

Americans are also seeing their savings increase. When Donald Trump was elected President, the Dow Jones sat at 18,332. It is now at above 29,000, an increase of more than 60 percent. This stock market growth benefits the 100 million 401(k)s, the 46.4 million households that have an individual retirement account, and the nearly $4 trillion in public pension funds, half of which is invested in stocks. 

This good news is not just anecdotal – there are numerous examples of companies providing increased benefits or pay raises to their employees and of utility companies reducing rates.

Businesses have responded to the tax cuts by creating new employee benefit programs including adoption programs, workforce development programs, and education programs. For example: 

  • Walmart and Lowes now provide $5,000 to help cover the cost of adopting a child.
  • Express Scripts in Missouri has created a $30 million education fund for their employees’ children.
  • Boeing provided $100 million in workforce development programs
  • McDonald’s employees who work just 15 hours a week, receive $1,500 worth of tuition assistance every year per year.
     

Companies have also reduced utility bills for Americans across the country. Utility companies in all 50 states are passing on the tax savings in the form of lower rates for customers. This means lower electric bills, lower gas bills, and lower water bills for Americans than if the corporate rate cut had not occurred. For example: 

Businesses have increased wages and bonuses to their employees. For example: 

  • Wells Fargo raised base wages from $13.50 to $15.00 per hour.
  • AT&T provided $1,000 bonuses to 200,000 employees. 
  • Cigna raised base wages to $16 per hour.
  • Apple provided $2,500 employee bonuses in the form of restricted stock.

 


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