Caution: 21st Century Cures Act Has A Suspicious Payment Plan

prescription-drugs(A version of this Health Alert was published by Investors Business Daily.)

The House of Representatives is scheduled this week to consider the 21st Century Cures Act (H.R. 6), a health policy bill designed to improve the economic incentives and streamline the process for inventing new medicines.

We applaud the act. It will go a long way to solving the crisis in pharmaceutical innovation. But we caution against the mandatory funding proposal in the bill and urge Congress to authorize and appropriate the funds instead of creating a new, mandatory spending program.

Because it can take as long as 12 to 15 years for the Food and Drug Administration to approve a new medicine, companies with innovative new drug therapies are often left with only five to eight years of effective patent life.

Hindering the profitability of new pharmaceuticals can dissuade companies from researching and developing new, life-saving drug therapies. Instead of deterring innovation, the federal government ought to streamline the FDA approval process and create incentives for more innovation. That’s precisely what the 21st Century Cures Act aims to do.

H.R. 6 seeks to improve FDA efficiency by breaking down outdated barriers and utilizing technology to streamline the approval process. It recognizes the unprecedented development of new technologies and removes the regulatory uncertainty surrounding modern health-related tools like smartphone medical apps.

It creates incentives for companies to develop drug therapies for rare or dormant diseases, and it boosts support for innovative new forms of medicine, like personalized medicine and biopharmaceuticals. And it creates incentives for finding new purposes for old medicines.

The National Center for Policy Analysis does not endorse specific pieces of legislation. But we encourage Congress to seriously consider the policies contained in H.R. 6 as a way to improve pharmaceutical innovation in particular and the nation’s health care system in general.

Nevertheless, in spite of the good public policy contained in the 21st Century Cures Act, we strongly caution against the mandatory funding mechanism that the bill creates.

As written, H.R. 6 proposes new mandatory spending to pay for the National Institutes of Health and the Cures Innovation Fund. The new mandatory spending bypasses the discretionary spending caps and will add almost $2 billion per year to our nation’s already-bloated mandatory spending obligations. This is unwise. Worse, it is irresponsible.

Virtually all of our current fiscal problems stem from hard-to-control mandatory spending programs. We estimate that U.S. taxpayers are already burdened with $100 trillion in unfunded mandatory spending obligations. Why would Congress consider adding another?

Congress should consider the good public policies in the 21st Century Cures Act as an authorization, subject to appropriation, instead of creating a new mandatory spending program. It may be difficult, but there is merit in the yearly appropriations process where federal programs must compete for limited funding.

Mandatory spending programs eliminate these tough funding decisions, bypassing the appropriations process altogether and leaving American taxpayers vulnerable to the overwhelming mandatory spending obligations we see today. The yearly budget and appropriations process forces spending programs to justify themselves every year, and it forces Congress to make frequent evaluations and decisions about how to spend scarce taxpayer dollars.

If the 21st Century Cures Act creates a better way to administer a federal program (we think it does), then it should compete against other federal spending programs for revenue. There are so many wasteful and bloated federal programs, it shouldn’t be difficult to find $2 billion per year to fund the good public policies in the 21st Century Cures Act.

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