One simple, bipartisan way to help rein in soaring healthcare costs
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The national debt and runaway federal budgets are a thorn in the side of policymakers and fiscal hawks alike, and no thorn is bigger than healthcare costs. They represent a large and growing sector of the federal budget, but recent experience has shown how difficult it will be to get movement on any sort of large-scale or meaningful reforms.

But all is not lost. By focusing on specific and long-needed reforms in the regulatory framework, policymakers have an easy opportunity to move in the right direction and even gain some bipartisan support to boot.

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The Food and Drug Administration’s (FDA) Risk Evaluation and Mitigation Strategies (REMS) system was created to ensure drug quality and safety, but is often used instead to make it more difficult for generic and biologic manufacturers to enter the marketplace — limiting competition and cost savings while creating drug-specific monopolies. These abuses occur when brand-name producers refuse to let generic competitors participate in shared safety protocols.

 

This monopoly power is reinforced by other means, such as refusing to let generic competitors have access to the biological materials necessary to test and prove that their generic versions are safe. In addition to being a clear violation of FDA’s intent, such abuses have the side effect of increasing drug costs to consumers, to the tune of billions per year. Savings from a robust generic marketplace have been estimated to be as high as $71 billion over a 10-year window.

Legislative attempts to fix these problems are promising. The FAST Act and CREATES Act — the latter of which will be discussed in a Thursday hearing — offer a path to relief for generic manufacturers whose power to innovate is being stifled by bad-faith actions through REMS.

Some may argue that these legislative solutions would encourage frivolous litigation, but the reality is that disputes of all kinds are already being litigated through the court system, and the measures would offer both clarity and an affirmative defense for frivolous actions.

Pursuing common-sense reforms can help patients and innovators, but as costs continue to mount, we should not overlook the potential benefits for taxpayers as well.

In 1960, healthcare made up just 5 percent of Gross Domestic Product. By 2015, it was nearly 18 percent and growing. Prescription drug costs were only 10 percent of total healthcare spending, but their growth rate in recent years has outpaced that of all other services.

The federal government is the largest single “consumer” of healthcare, and that includes pharmaceuticals. When costs rise, the federal government and taxpayers bear the largest burden, at nearly 30 percent. Federal involvement in healthcare will grow even faster as more and more Americans age into federal programs.

There may be few silver bullets that will solve America’s healthcare crisis, but any and all options toward that goal should be considered. The FDA has a crucial role to play in ensuring consumer safety — by taking proactive steps to ensure its systems are not used to crush competition, it can ensure the needs of consumers and taxpayers are considered as well.

Jonathan Bydlak is the founder and president of the Coalition to Reduce Spending, an advocate for lower federal spending. He's also the creator of SpendingTracker.org. He is a fiscal policy expert and also served as director of fundraising on Ron Paul's 2008 presidential campaign. Follow him on Twitter @jbydlak and @Reduce_Spending.


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