NCPA - National Center for Policy Analysis


September 16, 2009

Senate Finance Committee Chairman Max Baucus' (D-Mont.) bill intended to overhaul the health care system would be partially funded by new fees on the health care industry.  Starting next year, medical device makers would be forced to pony up $4 billion annually to the federal government; biopharmaceutical firms would be on the hook for $2.3 billion each year; and clinical labs would have to shell out $750 million a year.  All this in addition to the taxes they already pay.

Max Baucus has been drafting a health reform bill with a bipartisan group of three Republicans and three Democrats designed to garner support from both parties.  A final bill is expected to be released this week, and according to Sally Pipes, president and CEO of the Pacific Research Institute, certain provisions of the bill will hamstring medical innovation:

  • With less money for research, cutting-edge drugs already in the pipeline undoubtedly will take longer to get to market and whole lines of research aimed at curing diseases that currently lack treatments could be delayed or even canceled.
  • The government would start demanding a discount of 23.1 percent -- up from 15.1 percent -- on all brand-name drugs purchased by Medicaid, the government program for low-income Americans.

The health reform envisioned by Sen. Baucus, President Obama and most Democrats will not only require tax increases but will also lead to health care rationing, and an undermining of medical innovation, says Pipes.   In emphasizing the importance of medical innovation, she referenced two studies:

  • A 2005 study published in Medical Care found that every additional dollar spent on drugs for blood pressure, cholesterol, and diabetes shaves $4 to $7 off other medical spending.
  • A recent paper from the National Bureau of Economic Research found that Medicare ultimately saves $2.06 for every dollar it spends on prescription drugs.

Source: By Sally C. Pipes, "Senate Bill Would Tax Those Who Heal,", September 14, 2009

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