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CAPITOL PERSPECTIVES 4. 5 million low-income beneficiaries — a population that never had Medicaid coverage or its price control scheme. Numerous economic studies by government actuaries and leading academics have documented that pharmaceutical price controls will result in pricing distortions that will hike prices to employer plans, veterans, and nonlow income Medicare beneficiaries. Not everybody can get prices better than average. So why is the administration pushing such a policy when the pharmaceutical industry already contributed more than $100 billion to healthcare reform? Answer: Expanded Medicaid rebates will substantially restrict pricing flexibility for brand-name pharmaceutical companies. Under the Administration's proposal, any cumulative price increase that exceeds the CPI since launch will be recaptured as a rebate for about half of the drug spend in the Medicare program, in which free market pricing now applies. It wants control over pharmaceutical pricing. If the administration gets its way, there are only two possible outcomes: 1) substantial cuts to research and development, particularly for the more risky endeavors; and 2) job cuts to an industry that has already laid off 200,000 workers over the past several years. The Battelle Institute estimates that an impact of $10B to $20B a year on the industry, as the administration proposes, would result in 130,000 to 260,000 lost jobs in the high-wage pharmaceutical sector and the industries it supports. I am not aware of any government program that has come in 45% below budget, is vastly popular with its customers, and yet is being targeted for a fundamental overhaul. Congress should reject such a proposal. John McManus is president and founder of The McManus Group, a consulting firm specializing in strategic policy and political counsel and advocacy for healthcare clients with issues before Congress and the administration. Prior to founding his firm, McManus served Chairman Bill Thomas as the staff director of the Ways and Means Health Subcommittee, where he led the policy development, negotiations, and drafting of the Medicare Prescription Drug, Improvement and Modernization Act of 2003. Before working for Chairman Thomas, McManus worked for Eli Lilly & Company as a senior associate and for the Maryland House of Delegates as a research analyst. He earned his Master of Public Policy from Duke University and Bachelor of Arts from Washington and Lee University. 12 LifeScienceLeader.com April 2013