Emanuel, Bipartisan Coalition Unveil Rx Drug Competition, Free Market and Cost Savings Amendment to Medicare Bill

WASHINGTON, D.C.—WASHINGTON, D.C.—Today Congressman Rahm Emanuel (D-IL) joined forces with Rep. Gil Gutknecht (R-MN) to announce their plans to introduce the Rx Drug Competition, Free Market and Cost Savings Amendment to the pending House Medicare bill.  The bipartisan amendment seeks to reduce the cost of prescription drugs through targeted market reforms intended to increase competition and consumer access. 

The Medicare debate raging in both houses of Congress has primarily focused on modernizing the structure of the 38-year-old federal health care program for the elderly and enlarging Medicare to include a prescription drug benefit.  The current debate, Emanuel and Gutknecht argue, overlooks a crucial issue: drug prices for seniors. 

The Congressional Budget Office estimates that prescription drugs will cost Medicare beneficiaries $1.8 trillion over the next ten years.  The $400 billion Medicare drug benefit likely to be passed by Congress this week will make only a limited impact on these expenditures.   

“What’s missing from the Medicare debate this week is how America’s seniors can get the prescription drugs they need at affordable prices in a competitive, free market,” Rep. Emanuel said.  “The crux of this problem is that both the U.S. Government and American seniors are paying too much for prescription drugs.  Addressing the cost of prescription drugs will both greatly increase the value of a Medicare drug benefit for seniors and make drugs more accessible to all Americans.”

The amendment aims to reduce drug prices primarily through two market reforms.  First, picking up the central idea of the Greater Access to Affordable Pharmaceuticals Act, the amendment would encourage greater competition between generic and brand name pharmaceuticals by limiting brand companies’ ability to use legal loopholes and extend exclusive rights for drug production.  The Senate has already passed these provisions as an amendment to their Medicare drug bill.

Secondly, drawing on Gutknecht’s Pharmaceutical Market Access Act, the amendment would allow consumers to purchase prescriptions from foreign suppliers, who offer the same drugs at a fraction of the cost.  “The FDA has stood between Americans and affordable prescription drugs for too long,” explained Rep. Gutknecht.  “American consumers are held captive in a market that forces them to pay 30 to 300-percent more for the same FDA-approved prescription drugs produced in the same FDA-approved facilities.  It’s time to open markets now.”

The open market provision differs from what passed in the Senate in that this amendment allows for access to markets of several industrialized countries while the Senate amendment only provides for access to the Canadian market.  Also, the House provision does not contain language requiring the Secretary of Health and Human Services to affirm that all drugs are safe and would save consumers money, but provides for extensive safety precautions, including the use of counterfeit-resistant technology, and the inspection of all shipments that do not use counterfeit-resistant technology.

The third provision of the amendment addresses the fact that right now American taxpayers fund pharmaceutical research, but do not reap the benefits.  Meanwhile, in recent years, the rate of return on investment for pharmaceutical companies has been as high as 36%.  The amendment stipulates that the government will receive returns on investments in pharmaceutical research and development.  “American taxpayers contribute to pharmaceutical research through direct government investment at the same time pharmaceutical companies get tax write-offs for R & D investments.  Meanwhile American taxpayers are stuck paying the highest prices in the world for the drugs they need,” Emanuel commented.

For example, billions of American tax dollars contribute to pharmaceutical research each year.  A Boston Globe study found that out of 35 new drugs developed over a five-year period, 33 of them received National Institutes of Health (NIH) or Food and Drug Administration (FDA) funding.   A recent General Accounting Office report revealed that even though NIH contributed significantly to the research efforts for the breast cancer drug Taxol, Bristol Myers Squibb earned $9 billion in profits from this drug, and the federal government earned only 0.38% in royalties.

“This bipartisan amendment applies the principles of the free market to the prescription drug industry, providing increased access to generic drugs, opening markets to lower priced pharmaceuticals from other countries, and allowing the federal government to claim a well-deserved return on investments in R & D,” Emanuel said.  “These market reforms—more than any other provision in the Medicare bill—will make it more likely that the millions of uninsured and underinsured in this country can afford life-saving and life-preserving prescription drugs.” 

Emanuel and Gutknecht will offer the amendment to the Rules Committee later this week.  Other Members of Congress at the press conference included U.S. Reps Sherrod Brown (D-OH), Jo Ann Emerson (R-MO), Rep. Rosa DeLauro (D-CT), Rep. Walter Jones (R-NC), Rep. Carolyn McCarthy (D-NY), Rep. Anne Northrup (R-KY), Rep. Tim Ryan (D-OH), and Rep. Chris Van Hollen (D-MD).

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