Dear Ranking Member Wyden and Senate Finance Committee Minority Staff:

Thank you for the opportunity to respond to the Senate Finance Committee minority staff’s Request for Information (RFI) on policies to lower prescription drug prices, strengthen biopharmaceutical innovation, and inform future prescription drug pricing policy. As the Director of Health Care Policy at the American Action Forum (AAF), I support policies that increase access to innovative medicines for patients. As identified in the RFI, there are several legitimate challenges facing the U.S. health care system, including high out-of-pocket costs for some patients, distorted incentives within the prescription-drug supply chain, barriers to generic and biosimilar competition, increasingly expensive clinical development, and growing international competition in the life sciences.

Addressing these challenges begins with distinguishing among three objectives that are too often treated as interchangeable: lowering the underlying cost of developing and supplying medicines, reducing the amount paid by a government program, and limiting the portion of a drug’s cost borne directly by an individual patient. Each may be a legitimate policy objective, but they are not economically equivalent.

A sound policy framework must begin by distinguishing the cost of a medicine from its price.  Cost reflects the real resources required to discover, test, manufacture, and distribute a product, while price determines how those costs are divided among patients, insurers, taxpayers, and manufacturers. Government can reduce the amount paid by one party through reimbursement limits, rebates, subsidies, or cost-sharing caps without making the medicine less costly to produce; the remaining burden is instead shifted elsewhere in the system, potentially through higher premiums, greater taxpayer spending, reduced services, or diminished investment. Congress should therefore evaluate drug-pricing proposals according to whether they reduce the resources required to develop and supply medicines – not merely whether they change who ultimately writes the check.

An out-of-pocket cap can protect a beneficiary from a large expense, but the cost does not disappear; it is transferred to a health plan, taxpayers, manufacturers, other enrollees, or some combination thereof. A statutory rebate can reduce federal spending without making the production or distribution of a medicine less expensive. A government-administered reimbursement ceiling may produce a lower recorded price while weakening the incentives that support future research and development. Congress should therefore avoid presenting cost transfers or administratively imposed prices as reductions in the underlying cost of health care.

Congress should instead pursue reforms that:

1. Promote competition during and after a medicine’s period of lawful exclusivity;
2. Reduce unnecessary research, clinical-trial, regulatory, manufacturing, and distribution costs;
3. Improve the predictability and efficiency of Food and Drug Administration (FDA) review;
4. Provide targeted assistance to patients without disguising subsidies as system-wide savings; and
5. Strengthen conditions for private investment in U.S. biopharmaceutical innovation without converting the federal government into an owner of private companies.

Measuring against these principles, there are significant concerns with many of the RFI’s proposed directions. In particular, Congress should not expand the Medicare Drug Price Negotiation Program, incorporate most-favored-nation (MFN) pricing into Medicare, extend inflation rebates into the commercial market, or replicate industrial-policy models that permit federal equity stakes in private biopharmaceutical companies.

Congress Should Prioritize Competition and Lower Production Costs Over Government Price Setting

Prescription drugs are not insulated from economic fundamentals. The cost and risk of identifying a compound, conducting clinical trials, obtaining regulatory approval, constructing manufacturing capacity, complying with quality requirements, and distributing a medicine all affect the prices necessary to sustain its development and supply. Policies that reduce those costs can generate durable savings while preserving incentives for continued investment.

Congress should therefore focus on reforms that make it less expensive and less uncertain to bring medicine to patients. This could include improving coordination among institutional review boards, reducing duplication in clinical trial administration, facilitating decentralized and pragmatic trials where appropriate, modernizing the use of real-world evidence, and providing sponsors with clearer and more consistent FDA guidance. Clinical development is lengthy, expensive, and risky, and Congress should work to increase trial participation while making the process more efficient and affordable.

Congress should also encourage the adoption of advanced manufacturing technologies, support regulatory harmonization with trusted international partners, improve the consistency of facility inspections, and avoid tariffs or domestic content requirements that increase the cost of key starting materials, active pharmaceutical ingredients, manufacturing equipment, and finished medicines. Supply chain resilience is important, but resilience cannot be achieved by making production prohibitively expensive or restricting manufacturers to a small number of politically preferred suppliers.

Competition should remain the principal mechanism through which lower prices are achieved. During a product’s lawful period of exclusivity, manufacturers must retain a reasonable opportunity to earn returns sufficient to compensate for successful and unsuccessful research investments. After exclusivity expires, Congress and federal agencies should ensure that generic and biosimilar pathways produce timely and meaningful market entry.

This means improving the review of abbreviated new drug applications, facilitating the development of complex generics, and ensuring that any patent disputes are resolved efficiently without weakening legitimate intellectual property protections. For biologics, policymakers should reduce unnecessary regulatory distinctions around biosimilar interchangeability, improve provider and patient understanding, and ensure that payment systems reward rather than obstruct lower cost competition.

This market lifecycle – investment and innovation followed by vigorous post-exclusivity competition – offers a more sustainable approach than imposing administrative prices before competition would ordinarily emerge.

Medicare Drug Negotiation Should Be Evaluated, Not Expanded

The RFI repeatedly describes the Medicare Drug Price Negotiation Program as a demonstrated success and requests input on negotiating more drugs, selecting products earlier in their lifecycles, incorporating international prices into the process, and potentially extending negotiated prices into commercial insurance markets. Those proposals are premature and would deepen the program’s most consequential weaknesses.

The maximum fair prices (MFPs) for the first 10 selected drugs became effective on January 1, 2026. Consequently, Congress does not yet have a full year of observed evidence regarding changes in Medicare spending, beneficiary utilization, formulary management, prescribing behavior, manufacturer investment, or post-market clinical development. The Centers for Medicare and Medicaid Services’ (CMS) frequently cited estimate of $6 billion in savings was calculated by estimating what Medicare might have spent if the negotiated prices had applied retrospectively in 2023. CMS similarly projected future beneficiary savings rather than measuring observed savings under the program.

Those estimates may eventually prove directionally accurate, but they are not a substitute for a comprehensive evaluation. A lower federal payment on selected products does not, standing alone, establish that the policy improved the prescription drug market or produced net benefits after accounting for access, premiums, formulary changes, research investment, and future treatment options.

CMS itself has acknowledged that the first cycle prices only began operating this year and that the agency is still constructing the infrastructure necessary to effectuate those prices. Expanding the number of selected drugs or moving negotiation earlier in product lifecycles before these consequences are understood would substitute political momentum for evidence-based policymaking. Earlier selection would be especially damaging. The RFI considers shortening the period between FDA approval and eligibility for negotiation, including proposals under which prices could be administratively reduced after only a few years on the market. Such an approach would compress the portion of a product’s lifecycle during which revenues can compensate for years of development, a high probability of failure, manufacturing investments, and ongoing clinical research. A policy change of this nature may lead drug manufacturers to search for other opportunities to raise revenues; Congress should be wary of rushing into further policy changes before the program’s actual effects can be evaluated.

The harm would not be limited to the initially approved indication. Manufacturers frequently continue studying medicines after approval for additional diseases, populations, combinations, dosing regimens, and formulations. A substantially shorter commercial window would make some of that research uneconomic. The result could be fewer options for patients even where the initial product remains available.

Instead, Congress should evaluate the current iteration of Medicare drug negotiations:

• Are MFPs reliably available throughout the supply chain?
• Did plans alter formularies or utilization management in response to the Inflation Reduction Act?
• Has beneficiary access improved in practice?
• Have costs shifted to products outside the program or to other insurance markets?
• Did manufacturers reduce investment in follow-on indications or competing treatments?
• Have small molecule and biologic development patterns changed?
• What are the real operational burdens affecting pharmacies, physicians, wholesalers, and other dispensing entities?

Congress should also preserve reasonable safeguards for small biotechnology companies, orphan products, and medicines approaching generic or biosimilar competition. These provisions should be assessed according to whether they prevent negotiation from displacing imminent market competition or disproportionately harming companies dependent on a small number of products – not characterized reflexively as industry “bailouts.”

International Reference Pricing Would Compound, Not Correct, Medicare Price Setting

International reference pricing is an unsuitable foundation for constructing U.S. pharmaceutical policy. Prices in foreign systems are frequently the products of national formularies, administratively imposed reimbursement limits, health technology assessments, confidential rebates, delayed coverage decisions, and explicit or implicit restrictions on patient access. They are not market prices. Importing them into Medicare would import the results of foreign price control systems without importing the conditions that make those feasible, including coverage limitations, waiting periods, or other institutional choices.

International reference pricing also creates incentives for strategic behavior. Manufacturers may delay or decline launches in lower priced markets, narrow the indications for which they initially seek reimbursement, or restructure confidential discounts to avoid reducing the observable benchmark. Foreign governments may have stronger incentives to conceal net prices once those prices determine reimbursement in the world’s largest pharmaceutical market. A 2023 peer-reviewed analysis of 100 high-priced medicines found that external reference pricing was associated with a 73 percent lower likelihood of launch within nine months of regulatory approval, while the Organisation for Economic Co-operation and Development has found that confidential rebates increasingly separate published list prices from the net prices actually paid.

Most importantly, an international benchmark does not reduce the cost of developing or producing medicine. It instructs the United States to pay an amount derived from another government’s purchasing decision. Attaching that benchmark to the Medicare negotiation program would combine two layers of administrative price setting rather than introduce competition.

The fact that MFN arrangements have been proposed or implemented administratively does not demonstrate their success. Nor should participation by individual manufacturers in government-sponsored agreements be treated as an endorsement of international reference pricing as sound public policy. Companies operating under the threat of broader mandatory regulation may accept a negotiated arrangement as the least-damaging option.

Congress should reject both direct MFN systems and indirect efforts to incorporate foreign prices into Medicare’s MFP calculation. It should also reject extending Medicare-administered prices into the employer-sponsored or individual insurance markets. Such an expansion would move the United States closer to a national pharmaceutical price schedule, magnifying the consequences of any error in federal methodology.

Inflation Rebates and Direct-to-Consumer Models Require Similar Caution

Proposals changing Medicare inflation rebates through rebasing, including additional Part B utilization, and potentially extending inflation-based penalties into the commercial market, would further replace market signals with administratively determined price trajectories.

Inflation rebates are often described as penalties to avoid excessive price increases, but they effectively establish a government-approved rate of price growth. They can encourage manufacturers to set higher launch prices because subsequent adjustments are constrained. Extending them to commercial insurance would increase the likelihood that the initial list price becomes the principal margin through which manufacturers account for future uncertainty.

A broadly applied commercial inflation rebate would also represent a substantial federal intervention into private contracts. Congress should instead promote competition among therapeutically substitutable products, remove incentives for plans and intermediaries to prefer high-list-price drugs, and improve the ability of employers and insurers to evaluate net costs.

Subscription arrangements and direct-to-consumer distribution models may offer useful alternatives where they simplify access, improve price transparency, or reduce administrative friction, but neither should be presumed to lower underlying drug costs. That caution is especially important for GLP-1 medicines, where any subscription or direct-purchase model already requires governments, payers, or consumers to navigate uncertain eligibility, treatment duration, adherence, future indications, and competing market entry. Poorly designed arrangements could steer patients toward selected products, obscure the full cost of care, or expose taxpayers and consumers to expenditures that are difficult to evaluate. Congress should therefore preserve competition among manufacturers, pharmacies, plans, and distribution channels; require clear disclosure of prices and program terms; and avoid treating alternative purchasing models as substitutes for reforms that reduce development and distribution costs.

Patient Affordability Policies Should Be Described Honestly and Designed Carefully

Some patients face prescription drug costs that are unaffordable regardless of whether those costs represent a large portion of national health expenditures. Targeted financial protection can therefore be appropriate. Congress should nevertheless be explicit that these policies redistribute costs rather than eliminate them. An out-of-pocket cap reduces the amount paid by a beneficiary at the pharmacy counter but increases liability elsewhere in the benefit. Depending on its design, that liability may be financed through higher premiums, greater plan payments, manufacturer discounts, or additional federal spending.

This does not make beneficiary assistance illegitimate. It does mean that assistance should be targeted, transparent, and fiscally sustainable. Congress should prioritize patients for whom cost sharing creates a demonstrable barrier to clinically necessary treatment rather than establishing product-specific caps as the standard response whenever a drug becomes politically salient.

Basing cost sharing on a drug’s net rather than list price may alleviate circumstances in which beneficiaries pay coinsurance on an amount substantially above the plan’s final cost. Such a policy, however, should account for the relationship between point-of-sale discounts and premiums. Requiring every rebate to be applied at the point of sale could benefit patients using expensive rebated medicines while increasing premiums for the broader enrollee population. Policymakers should evaluate those distributional effects rather than assuming that rebate pass-through creates costless savings.

Supply Chain Reform Should Promote Competition Rather Than Establish New Price Schedules

When considering policies related to the pharmaceutical supply chain, Congress should focus on transparency, competition, and fiduciary accountability. Employers and health plans should be able to understand the full economic terms of their pharmacy benefit manager (PBM) arrangements, including rebates, administrative fees, pharmacy spreads, ownership interests, and compensation received from manufacturers or affiliated entities.

Contractual provisions that prevent plans from obtaining information, auditing performance, or contracting directly with manufacturers and pharmacies warrant close scrutiny. Similarly, PBM compensation should not increase merely because a drug has a higher list price. Net-effective-cost measures are generally superior to rebate guarantees because they focus purchasers on the ultimate cost of a medicine rather than the nominal size of a discount. Congress should ensure, however, that any federal standard permits plans to negotiate arrangements appropriate to their populations rather than prescribing a single contracting model.

A cost-plus or National Average Drug Acquisition Cost benchmark may provide useful information in generic markets, but it should not automatically become a universal federal payment rate. Acquisition cost surveys can lag rapid market changes and may not fully account for shortages, inventory risk, distribution expenses, pharmacy type, geographic conditions, or the cost of maintaining reliable supply. A rigid benchmark could unintentionally encourage pharmacies to avoid products or patients for whom reimbursement is inadequate.

Dispensing fees should more accurately reflect the services pharmacies provide, but a federally mandated minimum must avoid treating all pharmacies and prescriptions as identical. Retail, specialty, mail-order, long-term care, and rural pharmacies face different service obligations and operating costs. Congress should improve transparency and permit payment for identifiable services rather than using dispensing fees as another indirect subsidy untethered from performance.

Congress should also be cautious about mechanically applying Part D “delinking” concepts to Medicare Part B. Physicians who acquire and administer medicines bear inventory, financing, storage, wastage, staffing, and collection risks. Replacing the current percentage-based add-on without adequately accounting for those costs could make community practices less able to furnish treatment, particularly for expensive oncology and specialty products. Any alternative should be tested carefully, preserve adequate payment for acquisition and administration, and avoid accelerating consolidation into hospital outpatient departments.

The United States Should Strengthen Its Innovation Ecosystem Without Government Ownership

Policymakers must preserve a pipeline capable of producing future treatments and cures.  Congress should begin by reinforcing the institutions and incentives that have historically made the United States the leading environment for biomedical innovation. These include strong basic research institutions, world-class universities, reliable intellectual-property rights, sophisticated capital markets, a predictable regulatory system, skilled scientists, and a health care market capable of adopting valuable new technologies.

Federal support is most defensible where the market is least capable of capturing the full benefits of investment. Basic science is the clearest example. Sustained and predictable support for the National Institutes of Health and other public research institutions can generate broadly useful knowledge that no individual company can fully appropriate. Public policy can also help address translational gaps through competitively awarded research support, shared infrastructure, standardized data resources, and partnerships structured around scientific milestones.

At later stages, policy should generally rely on neutral incentives rather than federal selection of specific companies or drug candidates. Congress should preserve a stable research and development tax environment, permit timely recovery of domestic investment costs, improve access to capital for small biotechnology firms, and remove regulatory uncertainty that makes investors less willing to finance high-risk programs.

Clinical trial reform is another significant opportunity. Congress should promote greater use of centralized institutional review boards, interoperable health data, remote monitoring, decentralized trial elements, and modern recruitment tools. It should clarify when reasonable remuneration can be provided without violating federal program integrity and ethics rules. It should also make it easier for community physicians and health systems outside major academic centers to participate in research while preserving informed consent and patient protections.

The scientific workforce should be strengthened through domestic education and training as well as high-skill immigration. Scientists educated at U.S. universities should have a practical opportunity to remain and work in the United States. Visa and permanent-residency pathways for researchers, physicians, engineers, and other highly skilled professionals should reflect their contribution to the nation’s innovation capacity.

Manufacturing policy should focus on creating favorable conditions for investment across the sector rather than directing production company by company. Accelerated investment recovery, predictable FDA requirements, regulatory support for advanced manufacturing, permitting reform, and reliable access to energy and infrastructure would improve the economics of domestic production without allowing the government to choose corporate winners.

A Biopharmaceutical CHIPS Model Must Expressly Prohibit Federal Equity Stakes

The RFI requests comments regarding the establishment of a CHIPS Act-like legislative vehicle. The biopharmaceutical and semiconductor sectors differ in ways that make a direct transplant of the CHIPS model particularly problematic. Semiconductor policy is heavily oriented toward a limited number of extraordinarily capital-intensive fabrication facilities. Biopharmaceutical innovation is dispersed across universities, startups, contract research organizations, manufacturers, investors, and thousands of individual therapeutic programs, most of which will fail. A grant program built around selecting particular companies or pipelines would require federal officials to make highly speculative scientific and commercial judgments.

Recent implementation of semiconductor industrial policy, leveraging the CHIPS Act, also demonstrates a more fundamental governance concern. The Trump Administration used federal assistance associated with Intel to acquire an approximately 10-percent government stake in the company. The White House now publicly presents that equity position as a policy achievement.

Whatever the eventual financial return on that transaction, it establishes a troubling precedent. The federal government should not become an investor whose financial interests depend on the market performance of a private company it also taxes, regulates, contracts with, and potentially investigates. Government ownership can politicize capital allocation, create expectations of future rescue, disadvantage competitors that do not receive federal backing, and blur the line between public policy and corporate management.

These problems would be acute in biopharmaceuticals. A government equity stake in a drug developer could create perceived or actual conflicts involving FDA review, Medicare coverage, reimbursement, government purchasing, patent policy, and enforcement decisions. Even without formal voting rights, federal ownership could place pressure on agencies to protect the value of the government’s investment.

Any legislation drawing upon the CHIPS framework should therefore expressly prohibit:

• Federal acquisition of common or preferred equity;
• Warrants, options, convertible instruments, or contingent ownership rights;
• Voting rights, board representation, or special control rights;
• Conversion of grants, loans, tax benefits, or procurement agreements into ownership;
• Government participation in licensing, pricing, research, or commercial decisions; and
• Preferential regulatory or reimbursement treatment for federally supported companies.

The government has an important role in funding basic research, maintaining shared scientific infrastructure, protecting intellectual property, enforcing competition laws, supporting workforce development, and establishing predictable regulatory rules. It should not become a shareholder in the companies subject to those rules.

Conclusion

Congress should resist the assumption that every lower administered payment represents a lower economic cost or that every expansion of beneficiary subsidies makes the health care system more affordable. Medicare price negotiation and international reference pricing seek to reduce expenditures by constraining payments, not by making medicines less costly to discover, test, manufacture, or distribute. Expanding those policies before their full consequences are understood risks reducing future innovation while shifting costs throughout the health care system. Extending similar mechanisms into commercial insurance would magnify those risks.

A more durable strategy would reduce development and production costs, promote generic and biosimilar competition, correct misaligned supply-chain incentives, improve regulatory predictability, and provide focused assistance to patients with genuine affordability challenges. At the same time, Congress should reinforce the foundations of U.S. biopharmaceutical leadership through basic research, private capital, clinical-trial modernization, skilled workers, advanced manufacturing, and stable intellectual-property protections. These policies would pursue lower costs without sacrificing future treatments or replacing private investment with government ownership.

Once again, thank you for the opportunity to provide input on future prescription drug policymaking. I appreciate the Committee’s consideration of these comments. I would be happy to work with you, Finance Committee staff, and other Members of Congress on reforms that advance competition, affordability, and biopharmaceutical innovation.