June 6, 2017

An Open Letter to the House Energy and Commerce Committee:

Drug Importation Amendments to HR 2430 Will Hurt, Not Help, Taxpayers
and the Economy

Dear Chairman Walden, Vice Chairman Barton, Ranking Member Pallone, and Members of the
Committee:

As the Energy and Commerce Committee marks up HR 2430, the FDA/Prescription Drug User Fee Act
reauthorization bill, National Taxpayers Union (NTU) and its thousands of supporters across the country
caution you against proposals to facilitate the importation of prescription drugs from abroad. Specifically,
we understand that Congressman Welch will offer such a proposal. This amendment, which may be
similar or identical to those offered by Senator Sanders last month in the Health, Education, Labor, and
Pensions Committee, would be harmful not only to patients, but to taxpayers as well.

From a fiscal standpoint, importation is a terrible risk. Prescription drugs have long represented, and will
continue to represent, a moderate share of total health care spending in the U.S. (roughly ten percent).
These expenditures, however, also continue to offset other costs in the system, by shortening hospital
stays or obviating the need for surgeries. Taxpayers benefit as a result for example, according to the
National Bureau of Economic Research, every dollar spent on prescription drugs leads to a $2.06
reduction in Medicare expenditures. Policymakers should be loath to tamper, even at the edges, with this
elegantly balanced system of free-market drug development in the United States one that encourages
innovation and investment, while generally working to stabilize prices at their lowest level possible.

Over a decade ago, the Congressional Budget Office (CBO) concluded that the savings to the federal
government from importation would be minuscule, because those programs generally already pay among
the lowest prices on the market. Patricia Danzon and her colleagues at the Wharton School have likewise
concluded that the policing costs of importation would cut into most of its purported savings to
customers. The Medicare Modernization Act of 2003 required the FDA to certify that any Canadian
importation arrangement would have to result in a significant reduction in the cost of covered products to
the American consumer. Given the findings of CBO, Danzon, and others, it is no wonder that such
certification has never occurred, and its future prospects remain highly dubious.

Your colleagues in the Senate were confronted not only with an amendment instituting importation from a
variety of countries, but one targeted at Canada apparently as a more moderate policy alternative. We
are not privy to the exact nature of the amendment to be offered in your Committee, but such provisions
would, on their face, be an admission that importation is not some simple or painless exercise in health
care cost reduction. Introducing this harmful experiment, even if limited to a portion of medications sold
in Canada, is fraught with fiscal perils that would only grow when supporters would inevitably push to
expand the program.

Nor should Members of the Committee be led to believe that importation amounts to free or fair trade. As
a recent NTU Policy Paper, Trading in Trouble, noted:
 [S]ome fiscal conservatives assert that importation amounts to the exchange of prescription
medications at prices that are reached through the invisible hand gently guiding the equilibrium
of the free market around the world instead of just the United States. In reality, that hand is a
simply an appendage of big government, which in other countries (and to a major degree our
own) possesses the iron grip of price controls.

Our analysis also warned that importing self-destructive policies from abroad causes collateral damage
here at home. That damage extends to, but is not limited to, our own exports, our workers, our
shareholders, our efforts to liberalize and strengthen standards of international commerce, and the long-
term savings that innovative drug therapies deliver for taxpayer-funded health care programs. NTU
invites you to examine the full-length Policy Paper, which further explores the flaws of importation.

The Senate was wise in voting to avoid the importation trap earlier this year, when similar schemes were
offered in the HELP Committee as well as to the FY 2017 Budget Resolution. Now, Members of the
Energy and Commerce Committee can demonstrate leadership to their House colleagues (and to
taxpayers) by ensuring that importation does not undermine the vital policy discussions underway with
HR 2430. Please take this opportunity to vote no on any importation amendment. Thank you for your
consideration of our views.

Sincerely,

Pete Sepp
President

25 Massachusetts Ave NW Suite 140 Washington, DC 20001 Phone: (703) 683-5700 Fax: (703) 683-5722 Web: www.ntu.org