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We oppose negotiations on Medicare Part D drug prices

Benjamin Zycher, Ph.D.
Medical Progress Today
January 12, 2007

(This open letter was originally published in The Hill on January 10, 2007 )

We are deeply concerned about proposed legislation that would lead to negotiation of pharmaceutical prices by the federal government for the new Medicare Part D drug benefit.

Under current law, negotiations over prices are conducted between the pharmaceutical producers and private firms administering drug benefit programs for Medicare beneficiaries. With federal spending on pharmaceuticals is projected to grow to about $100 billion in 2007—over 40 percent of the U.S. total—some policymakers now advocate federal negotiation of prices with the pharmaceutical producers, in order to use the large size and bargaining power of the federal government to achieve sharply lower prices.

Federal price negotiations would represent a policy change carrying significant risks for research and development investment in new and improved medicines. A substantial body of research shows that similar federal drug programs impose prices substantially lower than those negotiated in the private sector, and that such lower prices inevitably will reduce research and investment in new and improved medicines. This slowdown in pharmaceutical innovation will yield highly adverse effects upon future patients in terms of reduced life expectancies.

We urge Congress not to support negotiation of drug prices by the federal government.

William P. Albrecht, University of Iowa
Donald L. Alexander, Western Michigan University
William R. Allen, University of California, Los Angeles
Charles W. Baird, California State University, East Bay
Stacie Beck, University of Delaware
James T. Bennett, George Mason University
Elizabeth Bogan, Princeton University
Kenneth W. Chilton, Lindenwood University
Robert Collinge, University of Texas, San Antonio
Gregory Conko, Competitive Enterprise Institute
Greg Delemeester, Marietta College
Arthur M. Diamond, Jr., University of Nebraska, Omaha
Joseph A. DiMasi, Tufts University
Kenneth G. Elzinga, University of Virginia
Stephen J. Entin, Institute for Research on the Economics of Taxation
Frank Falero, California State University, Bakersfield
John Goodman, National Center for Policy Analysis
Henry G. Grabowski, Duke University
John R. Graham, Pacific Research Institute
David Gratzer, Manhattan Institute for Policy Research
Kenneth Green, American Enterprise Institute
Steven F. Hayward, American Enterprise Institute
David R. Henderson, Hoover Institution, Stanford University
George Horwich, Purdue University
Paul I. Howard, Manhattan Institute for Policy Research
Sam Kazman, Competitive Enterprise Institute
Daniel Klein, George Mason University
Michael I. Krauss, George Mason University
Richard N. Langlois, University of Connecticut
Nicholas A. Lash, Loyola University of Chicago
John R. Lott, State University of New York, Binghamton
Kerry Macintosh, Santa Clara University
John McClaughry, Ethan Allen Institute
Roger E. Meiners, University of Texas, Arlington
Adrian Moore, Reason Foundation
James B. O'Neill, University of Delaware
June O'Neill, Baruch College, City University of New York
Sally C. Pipes, Pacific Research Institute
Peter J. Pitts, Center for Medicine in the Public Interest
Robert W. Poole, Jr., Reason Foundation
Jay R. Ritter, University of Florida
Philip J. Romero, University of Oregon
Mark Rush, University of Florida
Mike Schuyler, Institute for Research on the Economics of Taxation
William F. Shughart II, University of Mississippi
Fred L. Smith, Jr., Competitive Enterprise Institute
John C. Soper, John Carroll University
Alex T. Tabarrok, George Mason University
John A. Vernon, University of Connecticut
Murray L. Weidenbaum, Washington University
Paul J. Zak, Claremont Graduate University
Benjamin Zycher, Manhattan Institute for Policy Research

None of the individuals signing this letter receives funding from pharmaceutical interests, but some of the affiliated institutions (listed for identification purposes only) receive such research funding.

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