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Buttigieg proposes steep taxes on pharmaceutical companies who won't negotiate drug prices

Posted at 7:54 AM, Oct 07, 2019

SOUTH BEND — South Bend, Indiana, Mayor Pete Buttigieg released a plan early Monday morning aimed at reducing prescription drug costs and jump-starting pharmaceutical innovation.

"Time and time again, Washington has proven that it's either uninterested in or incapable of addressing this problem," the 2020 Democratic presidential candidate writes. "Instead of siding with Americans, politicians have stood with corporate health care, as they did when Congress barred the federal government from negotiating with pharmaceutical companies on drug prices for seniors."

The plan, titled "Affordable Medicine for All," would offset $100 to 200 billion in spending by penalizing pharmaceutical companies that raise prices by more than inflation and by increasing the annual Branded Prescription Drug Fee, a section of the Affordable Care Act that sets an annual fee according to each manufacturers share of drug sales to government programs like Medicare Part D and the VA.

Buttigieg's plan, which CNN obtained Sunday afternoon, echoes proposals from fellow 2020 hopefuls, including California Sen. Kamala Harris and Vermont Sen. Bernie Sanders, in capping out-of-pocket drug spending, setting a limit at 50% for seniors on Medicare and at $250 per month for those choosing a public health insurance option under Buttigieg's newly released "Medicare for All Who Want It" plan.

The plan also calls on the federal government to negotiate drug prices with pharmaceutical companies based on a series of criteria, including "(1) the therapeutic gain offered by the drug, (2) the cost of bringing the therapeutic class of drugs to market, (3) the current costs of treating the indicated disease, and (4) international prices charged for these drugs."

On the campaign trail, Buttigieg has often called for steep penalties for "deliberately making it harder, gouging the American people," to pay for drug costs, telling voters in South Carolina last month that any pharmaceutical company found guilty of doing so "has to be punished with real teeth."

Under his new plan, drug companies who fail to negotiate or leave negotiations before fair prices are agreed face a 65% tax on the company's sales of the drugs, with an increase of 10 percentage points per quarter until the company complies with negotiations.

"The first drugs for negotiation will be those with very high price tags and large price differences between what we pay and what other industrialized countries pay, including those to treat diabetes, asthma, arthritis, HIV, and cancer," the campaign tells CNN.

Buttigieg's plan also empowers federal agencies, including the Department of Justice, the Department of Health and Human Services, and the Federal Trade Commission to intervene when necessary, and would allow an attorney general to invoke eminent domain power to seize patents on drugs when so-called "worst offender" pharmaceutical companies refuse to negotiate prices or in cases of natural disasters or public health emergencies.

But Buttigieg's plan isn't all stick -- in a carrot approach to innovation, the campaign also touted a series of incentives aimed at expanding federal programs to increase manufacturing capabilities.

"The United States must remain a leader in the high-tech field of drug manufacturing," the plan pledges. "Pete supports expanding federal initiatives to invest in American manufacturing of prescription drugs, such as providing companies with tax incentives and grants to explore novel manufacturing like 3D printing technologies, and encouraging public-private partnerships to invest in new domestic production." In addition, the plan calls for increased regulatory funding to ensure agencies like the FDA can further guarantee quality and safety of drugs manufactured in the US.

How much of Buttigieg's plan is achievable remains to be seen, however, much of his proposals -- like setting caps on out-of-pocket spending -- rely on legislative action. Similar plans, like the one proposed by Harris, are at least part reliant on executive action in the case of a deadlocked Congress.

President Donald Trump also made lowering prescription drug prices a cornerstone of his presidency, pledging to lower drug prices by basing their costs in other developed countries, but few of his proposals have been enacted.