Madam Speaker, I yield myself such time as I may consume. Madam Speaker, I join Chairman Neal in expressing our heartbreak and sorrow in losing Congresswoman Jackie Walorski, our colleague, as well…
Madam Speaker, I yield myself such time as I may consume.
Madam Speaker, I join Chairman Neal in expressing our heartbreak and sorrow in losing Congresswoman Jackie Walorski, our colleague, as well as Zachery and Emma. She was so proud of her Team Walorski folks.
The truth of the matter is, Jackie lit up every room she was in with her passion and her brilliance and her friendship and warmness. There is no question she could do everything. She was all in on everything and worked hard to find common ground wherever she could.
Last week was a shocking week and a week to mourn. This week is a time to celebrate Jackie, her legacy, and her life.
Sadly, this massive Senate bill, drawn in secret, stuffed with government checks to the wealthy and favored interests, and rushed through Congress is a hoax on the American people. It fails to reduce inflation, fails to reduce the budget deficit, and fails to reduce the world's temperature.
Who in their right mind raises taxes in a recession? The answer is only President Biden and his supporters in Congress who bungled this economic recovery think that is a good idea. You remember them. They told you they would defeat COVID, that inflation was a rich person's problem, that their $2 trillion spending spree last spring would strengthen the economy.
Instead, what did their promises deliver? The worst inflation in 40 years, a recession, and a crippling worker shortage that continues to hammer Main Street businesses.
Today, we have a shrinking economy, shrinking paychecks, and a shrinking workforce. Families are skipping meals, running up credit card debt to pay for daily essentials, delaying retirement, and struggling to afford gas just to drive to work. Yet, Democrats today insist inflation doesn't even exist. They say it is zero.
The truth is, most Americans have lost confidence in President Biden's failed handling of the economy. By contrast, the majority of the jobs in the COVID recovery came under President Trump, and under Republican leadership, paychecks grew twice as fast as prices. The economy was surging, not shrinking like it is today, and 600,000 more Americans were working than today under this unpopular White House.
Why would you trust the same Democrats responsible for this cruel economy with another of their misguided spending bills?
While other countries are lowering taxes to fight inflation, Democrats imposed over $350 billion in taxes that land on local manufacturers that build right here in America. It will kill jobs, slow the economy, and raise prices even higher.
Small businesses, which hire nearly half of all workers in America, get hammered with $50 billion in new taxes.
Senior citizens and savers will bear the impact of $74 billion in new taxes that punish companies from investing in their stock value.
All these taxes will hurt the economy, drive inflation further, and harm workers' paychecks, according to the independent Tax Foundation.
Democrats promise that no American will ``see a penny'' of tax hikes, yet Congress' own budget office debunks that claim, confirming the largest burden of higher taxes will come from middle-class families starting next year.
President Biden is violating his own pledge not to raise taxes on middle-class Americans. He is denying that truth.
Yesterday, House Democrats insisted there are no new IRS agents funded in this bill. Read their lips: No new IRS agents. They say it is all fearmongering, and they are just hiring replacements.
Unfortunately, the fact is the IRS budget already budgets for those who are leaving through attrition, and the Treasury Department itself outlines the next decade of adding 87,000 new IRS agents. That is what this bill unleashes.
In fact, the Congressional Budget Office reports ``audit rates will increase for every income level,'' that almost 90 percent of unreported tax income comes from who? The middle class.
How will Democrats collect $204 billion in more taxes? With thousands of new agents targeting what I would call Walmart shoppers. You know them. They are real, hardworking American families. They are my constituents. They are my neighbors in my district. They are living paycheck to paycheck, struggling with inflation and higher gas prices. They will be hit with over 700,000 new audits, thanks to a skyrocketing surge in IRS agents.
Maybe that is why Democrats blocked any language in the Senate that protects Walmart shoppers and other value-shopping families against
these new IRS audits. But, man, this bill, they love the wealthy. If the Green New Deal and corporate welfare had a baby, it would look like this. Nearly one-quarter of a trillion dollars in Green New Deal subsidies, government handouts, go to the wealthy and to the biggest, most successful businesses in America.
Look at this: A single working mom will pay higher taxes so they can be sent in a government check to wealthy investors and massive corporations. A yardman will send his taxes in a government check to the very well-to-do family whose lawn he is cutting so they can splurge on an $80,000 luxury electric vehicle.
Incredibly, to fund all these government handouts, every Senate Democrat and the Vice President chose to impose higher taxes on small businesses so that millionaires and billionaires would be protected from higher State and local taxes.
Everyone facing devastating diseases like cancer, Alzheimer's, ALS, and Parkinson's will pay a deadly price.
This crazy bill increases the cost of healthcare and medicines and kills new lifesaving cures while providing ObamaCare subsidies for the wealthy and those choosing not to return to work, making the worker shortage harsher.
Congress' nonpartisan scorekeeper, the Penn Wharton School of Business, and the University of Chicago all confirm the government price-fixing scheme could be a death sentence for patients, raising the costs of new drugs, crushing innovation, and killing hundreds of cures.
Higher taxes, harassing IRS audits on our Walmart shoppers, no relief from inflation, all as America battles a recession.
Let me ask again: Do you really trust the same President and Democrats who drove this economy into recession and drove prices sky high with yet another spending spree?
Madam Speaker, I strongly urge my colleagues to vote ``no'' on this bill, and I reserve the balance of my time.
Madam Speaker, I include in the Record Page 16 of the Department of the Treasury's tax compliance plan, which shows the agency intends to hire 87,000 new IRS employees.
Restoring IRS Resources
The first step in the President's efforts to restore IRS
enforcement capability is a sustained, multi-year commitment
to rebuilding the IRS. This involves spending nearly $80
billion on IRS priorities over the course of the decade
including hiring new specialized enforcement staff,
modernizing antiquated information technology, and investing
in meaningful taxpayer service--including the implementation
of the newly expanded credits aimed at providing support to
American families. Importantly, the additional resources will
go toward enforcement against those with the highest incomes,
and audit rates will not rise relative to recent years for
those earning less than $400,000 in actual income.
The President's proposal includes two components: a
dedicated stream of mandatory funds ($72.5 billion over a
decade) and a program integrity allocation ($6.7 billion over
a decade). These mechanisms provide for a sustained, multi-
year commitment to revitalizing the IRS that will give the
agency the certainty it needs to rebuild.
The IRS proposal includes year-by-year estimates of the
additional resources that will be directed toward the agency
as well as the specific activities that these resources would
support. The design ensures that the IRS is able to absorb
and usefully deploy additional resources over the entire 10-
year horizon and keeps budget growth manageable at around 10
percent per year.
Madam Speaker, I yield 1 minute to the gentleman from Oklahoma (Mr. Hern).
Madam Speaker, I include in the Record a CBO letter,
which confirms the Affordable Care Act subsidies will boost inflation and reduce the incentive for people to work.
U.S. Congress,
Congressional Budget Office,
Washington, DC, August 4, 2022.
Re Economic Analysis of Budget Reconciliation Legislation
Hon. Lindsey Graham,
Ranking Member, Committee on the Budget,
U.S. Senate, Washington, DC.
Dear Senator: Yesterday, the Congressional Budget Office
published a cost estimate for H.R. 5376, the Inflation
Reduction Act of 2022, which is the latest version of the
reconciliation legislation in the Senate.\1\ This letter
provides answers to four questions you asked related to that
bill and broader economic conditions.
Is the United States Currently in a Recession?
The U.S. economy shows signs of slowing, but whether the
economy is currently in a recession is difficult to say. It
is possible that, in retrospect, it will become apparent that
the economy moved into recession sometime this year. However,
that is not clear from data that were available at the
beginning of August. Some key metrics indicate a decline in
economic activity as the first half of this year progressed,
whereas others indicate continued growth, though generally at
a slower rate than previously.
Real gross domestic product (that is, GDP adjusted to
remove the effects of inflation) and industrial production
have both declined. In particular, real GDP declined by an
average of 1.25 percent (at an annual rate) in the first two
quarters of 2022. Industrial production grew from January to
April, was essentially unchanged in May, and then declined in
June.
Other key indicators of economic activity have continued to
increase in the first half of 2022, though generally at a
slower rate than they had previously. For instance, real
gross domestic income (GDI) increased at an annual rate of
1.8 percent in the first quarter of 2022 after growing by an
average rate of 6.3 percent in the second half of 2021.\2\
(Second-quarter data for GDI are not yet available.) Real
personal income minus transfer payments to people by federal,
state, and local governments grew at an average annual rate
of 0.5 percent in the first half of 2022 versus 3.1 percent
in the second half of 2021. And real personal consumption
expenditures grew at an average annual rate of 1.4 percent in
the first half of 2022 (with somewhat slower growth in the
second quarter than in the first), compared with 2.2 percent
in the second half of 2021. One reason for the deceleration
in personal consumption expenditures is higher inflation,
which has eroded consumers' purchasing power. Another reason
is that real disposable personal income has declined in the
first half of 2022. Savings accumulated during the
coronavirus pandemic, including from transfer payments, have
continued to support consumption.
The labor market remains tight, with low unemployment and
elevated job vacancies, but both measures have softened in
recent months. Net gains in nonfarm payroll employment
averaged 375,000 jobs per month in the second quarter of 2022
compared with 539,000 jobs, on net, added per month in the
first quarter and 590,000 jobs, on net, added per month in
the second half of 2021. In June 2022, the unemployment rate
was 3.6 percent (unchanged since March and near its
prepandemic low) and there were about 1.8 job vacancies for
every unemployed worker (one of the highest readings in the
near 22-year history of this series though down from its
highest level of 2.0 in March).
How Would Enacting the Bill Affect Inflation in 2022 and 2023?
In calendar year 2022, enacting the bill would have a
negligible effect on inflation, in CBO's assessment. In
calendar year 2023, inflation would probably be between 0.1
percentage point lower and 0.1 percentage point higher under
the bill than it would be under current law, CBO estimates.
That range of likely outcomes reflects uncertainty about how
various provisions of the bill would affect overall demand
and output, the supply of labor, the persistence of
disruptions in the supply of goods and services, and how the
Federal Reserve would respond to offset any increase in
inflationary pressure. Responsiveness to the enhancement of
health insurance subsidies established by the Affordable Care
Act is the most important factor boosting inflationary
pressure, and responsiveness to the new alternative minimum
tax on corporations is the most important factor reducing
inflationary pressure. The range applies to multiple measures
of inflation: the GDP price index, the personal consumption
expenditures price index, and the consumer price index for
all urban consumers.
In its analysis of the inflationary effects of the bill,
CBO used an approach similar to that underlying the agency's
estimates of the short-term effects of legislation enacted in
2021.\3\ The agency augmented its analysis to account for the
effects of supply disruptions and for the amount of tightness
or slack in the economy on the inflationary effects of fiscal
policy.
Key inputs into the analysis of inflation were the effects
of the bill on overall demand for goods and services. In the
short term, changes in fiscal policies affect the economy
primarily by influencing the demand for goods and services by
consumers, businesses, and governments, which leads to
changes in output. Factors increasing overall demand push
inflation up and those decreasing overall demand push
inflation down. To estimate the effects of changes in federal
spending and revenues on overall demand and output, CBO
considered evidence about the effects of similar policies in
the past and used results produced by macroeconomic
models.\4\
CBO expects different provisions of the legislation to
affect overall demand and output differently.\5\ For example,
provisions that directly increase government purchases of
goods and services would add to overall demand on a dollar-
for-dollar basis. Increases in financial support to people,
such as through enhanced health insurance subsidies, would
boost spending more among lower-income people than among
higher-income people, partly because lower-income households
typically consume a higher fraction of their additional
disposable income than higher-income households do. Thus,
financial assistance to lower-income households would boost
the overall demand for goods and services more than financial
assistance to higher-income households would. Changes to
business taxes that affect after-tax profits on past
investments--as opposed to the return on new investments--
would have relatively small effects on overall demand, in
CBO's assessment.
CBO used its estimates of the bill's net effects on the
deficit as the starting point for its analysis of overall
effects on demand (see Table 1). The enhanced health
insurance subsidies and energy-related subsidies were the
largest contributors to increases in the deficit. The new
alternative minimum tax on corporations was the largest
contributor to reductions in the deficit. For each dollar
change in the deficit, the increases in subsidies would
probably have larger effects on overall demand (boosting it)
than the increases in revenues (which would reduce overall
demand). Those factors could contribute to the effects on
output and inflation being positive even when the overall
deficit was reduced.
Madam Speaker, I yield 1 minute to the gentleman from Texas (Mr. Arrington).
Madam Speaker, I include in the Record the Joint Committee on Taxation analysis that shows that families earning $75,000 or $100,000 are four times more likely to have a tax hike under this bill than a tax cut.
Nonpartisan Tax Scorekeeper: Average Working Family Is More Likely To
Be Worse Off Than Better Off Under Democrats' Tax Plan
Working families will be worse off under Democrats' higher
taxes, according to a new analysis from the nonpartisan Joint
Committee on Taxation. This is another devastating blow for
families after the Congressional Budget Office revealed that
Democrats' supercharged IRS expects to grab $20 billion from
lower- and middle-income earners.
Working Families at High Risk of Tax Hikes
Democrats have once again tried to hide the real effects of
this bill. New analysis from the nonpartisan Joint Committee
on Taxation (JCT) shows that the average working family is
more likely to be worse-off than better-off under Democrats'
tax plan.
For median-income families earning $50,000-$75,000,
households are 33 percent more likely to have a tax hike than
a tax cut.
It gets worse for every dollar earned--families earning
$75,000-$100,000 are four times more likely to have a tax
hike than a tax cut, and families earning $100,000-$200,000
are more than ten times more likely to have a tax hike than a
tax cut.
The bill does nothing--or makes things worse--for regular
working families. More than 92 percent of households with
incomes under $200,000 get no benefit--or a tax hike--under
Democrats' bill.
What's more, these tax hikes on working families do not
include the bill's superfund or methane taxes on American
energy, which disproportionately harm middle- and lower-
income households through higher prices at the pump and
bigger utility bills.
High-Income Households Enjoy Big Benefits
The JCT analysis shows the landscaping company owner and
his workers pay more, while the wealthy homeowner gets checks
from Washington for the solar panels on their roof. That's
because the ``winners'' under Democrat's tax plan are the
earners at the very top. Democrat's reckless spending plan
includes more than $250 billion in Green New Deal subsidies
that benefit the wealthy the most.
The percentage of $1 million-plus households getting a tax
cut (19.4 percent) is twice as high as any other income
group.
The group with the next highest proportion of tax cuts is
those earning $500,000-$1 million.
Over the long term, 72.5 percent of households with income
over $1 million will receive a tax cut.
More Bad News: $10.6 Billion in Tax Hikes on Working Families Next Year
Separate analysis by JCT isolates the effects of Democrats'
tax plan without the Obamacare subsidies that flow to a
limited number of households in an attempt to bribe them into
one-size-fits-all Obamacare plans. In 2023, Democrats would
increase the total tax burden on Americans under $200,000 in
income by $10.6 billion.
Madam Speaker, I yield 1 minute to the gentleman from Tennessee (Mr. Kustoff).
Madam Speaker, I include in the Record a letter from the Congressional Budget Office, which confirms this bill will actually increase the cost of new drugs.
U.S. Congress,
Congressional Budget Office,
Washington, DC, August 4, 2022.
Re Additional Information About Prescription Drug Legislation
Hon. Jason Smith,
Ranking Member, Committee on the Budget,
U.S. House of Representatives, Washington, DC.
Dear Congressman: This letter provides additional
information that you and your colleagues requested about
subtitle I of the reconciliation recommendations of the
Senate Committee on Finance regarding prescription drug
legislation. You asked about how provisions involving
inflation rebates and the negotiation of drug prices would
affect launch prices for new drugs and the introduction of
new generic drugs. You also asked how a provision to
stabilize premiums as a part of the redesign of Medicare's
benefits would affect the federal budget and premiums.
Effect of the Inflation-Rebate and Negotiation Provisions on Launch
Prices
The Congressional Budget Office projects that the
inflation-rebate and negotiation provisions would increase
the launch prices for drugs that are not yet on the market
relative to what such prices would be otherwise. That effect
would primarily be driven by the inflation-rebate provisions
(sections 129101 and 129102), which would begin to apply to
prices within 12 months of a given drug's entering the
market. Under those provisions, manufacturers would have an
incentive to launch new drugs at a higher price to offset
slower growth in prices over time. The negotiation provision
(section 129001) would have less of an impact on launch
prices, CBO expects: Although the ceiling for a drug's
negotiated price is based on its price from a prior year,
negotiation could not occur until drugs were on the market
for a number of years--at least 7 for small-molecule drugs
and 11 for biologics.
Higher launch prices would primarily affect spending for
drugs in the Medicaid program, CBO projects, because an
increase in that program's basic rebate brought about by the
higher launch prices would only partly offset those prices.
Higher launch prices would also tend to affect spending for
drugs covered by Part B of the Medicare program because that
program's payments for those drugs are based on the average
sales prices. Over time, slower price growth would attenuate
the effect of higher launch prices.
In the commercial and Medicare Part D segments of the
market, spending would be less affected by higher launch
prices, CBO estimates, because manufacturers would have more
flexibility to manage rebates to maximize their revenues in
those sectors.
Effect of the Negotiation Provision on the Introduction of New Generic
Drugs
CBO has not analyzed the effects of the negotiation
provision on the introduction of new generic drugs. In
projecting the effects of the negotiation provision, CBO
estimated the share of spending that would be subject to
negotiation each year and the average reduction in prices
that would stem from the negotiations. But the agency did not
analyze how the provision would affect prices or spending on
specific drugs, nor did it quantify any impact on the
introduction of new generic drugs.
Effects of the Premium-Stabilization Provision
Under the premium-stabilization provision (section 129201),
the federal government would subsidize any growth in
beneficiaries' base premiums for Medicare Part D exceeding 6
percent from one year to the next over the 2024-2029 period.
The provision subsequently would lower the base premium
percentage (the percentage of the average cost of standard
Part D coverage that is used to calculate beneficiaries'
premiums) to ensure that premiums did not grow by more than 6
percent between 2029 and 2030. That subsidy and subsequent
reduction in premiums would increase federal spending by
roughly $40 billion over the 2024-2031 period, CBO estimates.
Beneficiaries' spending on premiums would be lower under the
premium-stabilization provision than it would be without it.
That estimate is an average effect among the possible paths
of premiums that CBO considered when modeling the uncertainty
of future outcomes. Under some of those paths, premiums would
grow by less than 6 percent a year, and the provision would
have no cost; under others, premiums would grow faster, and
the provision would generate costs.
I hope this information is useful to you and your
colleagues. Please contact me if you have further questions.
Sincerely,
Phillip L. Swagel,
Director.
Madam Speaker, I yield 1 minute to the gentleman from Arizona (Mr. Schweikert), my colleague on the Committee on Ways and Means.
Madam Speaker, I include in the Record a Congressional Budget Office report from this morning, while we were on the House floor, which confirms IRS audits will generate tens of billions of dollars for middle-class families making less than $400,000.
CBO has received a number of questions regarding our
estimate of an amendment offered by Senator Crapo during the
floor debate on H.R. 5376 last weekend. That amendment,
#5404, would limit the use of additional funds for the
Internal Revenue Service. If the amendment had been adopted
none of the additional funds could have been used to audit
taxpayers with taxable incomes below $400,000.
CBO did not complete a formal cost estimate in advance of
consideration of the amendment but the agency did provide the
following information to the Senate Budget Committee:
CBO estimates that the amendment 5404 would have the
following effects:
No effect on outlays in the one or ten year budget windows;
would reduce outlays in the five year budget window.
No effect on revenues in the one year budget window; would
reduce the ``non-scorable'' revenues resulting from the
provisions of section 10301 in the five and ten year budget
windows.
No effect on outlays after 2031 but would decrease the
``non-scorable'' revenue resulting from the provisions of
section 10301 after 2031.
CBO has not completed a point estimate of this amendment
but the preliminary assessment indicates that amendment 5404
would reduce the ``non-scorable'' revenues resulting from the
provisions of section 10301 by at least $20 billion over the
FY2022-FY2031 period.
Thanks,
Leigh Angres,
Director of Legislative Affairs,
Congressional Budget Office.
Madam Speaker, I yield 1 minute to the gentleman from Pennsylvania (Mr. Kelly), my colleague from the Committee on Ways and Means.
Madam Speaker, I include in the Record the following report from 2020 from a group that tracks government spending, which details how the IRS is currently armed with 4,600 guns and 5 million rounds of ammunition. That is not fear-mongering; these are the facts.
IRS Has 4,600 Guns and Five Milion Rounds of Ammo: Will Dem Bill Grow
Arsenal?
The IRS has 4,600 guns and five million rounds of
ammunition according to a report from OpenTheBooks published
in 2020. With Democrats on the verge of passing $80 billion
in additional funding to facilitate the hiring of 87,000 new
agents, how much will this arsenal grow?
The Democrats' push to increase the size and power of the
IRS has significant criminal justice and basic due process
ramifications.
An OpenTheBooks report titled The Militarization of U.S.
Executive Agencies shows that, even without the proposed $80
billion increase in funding, the IRS Criminal Investigation
Division (IRS-CI) is already heavily armed at the expense of
the American taxpayer.
The current 4,600-gun stockpile includes:
3,282 pistols
621 shotguns
539 rifles
15 fully automatic firearms
4 revolvers
According to the Government Accountability Office the
ammunition breakdown is as follows:
Pistol and revolver rounds: 3,151,500
Rifle rounds: 1,472,050
Shotgun rounds: 367,750
Fully automatic firearm rounds: 56,000
When OpenTheBooks directly asked the IRS for an accounting
of its gun locker, the agency responded, ``We don't have one
[an inventory], but could create one for you, if important.''
There are seven reasons to be concerned about the IRS
having more power, more money, and more guns:
1. irs fails to ensure armed agents receive required firearms training
In order to carry or use an IRS-owned weapon, agents must:
engage in handgun firing training at least once each quarter,
shoot at least the minimum of 75 percentage points on the
firearms qualifying test using the issued handgun during two
nonconsecutive quarters, participate in biannual firearms
building entry exercises, participate in an annual briefing
on firearms safety and security policies and IRS-CI's
directives and procedures regarding the safe handling and
storage of firearms, and participate in a briefing each
quarter regarding the policy of discharging a firearm at a
moving vehicle.
IRS-CI's National Criminal Investigation Training Academy
(NCITA) is responsible for implementing the formalized
firearms training and qualification program nationwide. This
includes developing the firearm qualification requirements
they are expected to meet and the training special agents
will undergo. Despite these requirements, CI agents have
regularly failed to stay up to date on training or report
incidents, endangering the taxpayers they are supposed to
protect.
According to reports from the Treasury Inspector General
for Tax Administration (TIGTA), the IRS has repeatedly failed
to ensure that procedures relating to firearms are properly
followed:
``there is no national-level review of firearms training
records to ensure that all special agents meet the
qualification requirements.''
Special agents are required to surrender their weapons when
they fail to participate
in this training, however this often does not happen.
As noted by the Inspector General:
``However, there is currently little consequence for
special agents who fail to meet the training requirements
listed on the checklist.''
The Inspector General noted the IRS failed to secure the
firearms of those who did not meet their requirements:
``controls did not ensure that CI personnel properly
secured firearms when special agents failed to meet the
biannual standard qualification requirement. CI was only able
to provide evidence that firearms were surrendered in nine of
the 27 instances when special agents did not qualify. The
Criminal Investigation Management Information System was only
updated to reflect the custody change in four of those nine
instances.
The Inspector General noted that the IRS lapses torpedo its
ability to effectively try cases:
``Court decisions in the past have held law enforcement
entities liable because their law enforcement agents did not
have training that reflected the environment that they would
likely encounter, such as training involving moving targets
and low-light conditions. Other court decisions underscored
the importance of properly documenting firearms training. One
decision dismissed the claims against a law enforcement
entity that maintained thorough records that showed the law
enforcement personnel had been trained. Another decision
upheld a jury's conclusion that undocumented police training
did not constitute adequate training.''
The IRS failure to conduct proper internal oversight of its
weapons could have grave consequences for the public. As
noted by the Inspector General:
``If there is insufficient oversight, special agents in
possession of firearms who are not properly trained and
qualified could endanger other special agents and the
public.''
2. irs agents accidentally fire their weapons more often than they
intentionally fire them
A TIGTA report found that special agents at the IRS
Criminal Investigation Division (IRS-CI) accidentally fired
their weapons more often than they intentionally fired them:
``According to documentation provided by all 26 CI field
offices, the NCITA, and the TIGTA OI, there were a total of
eight firearm discharges classified as intentional use of
force incidents and 11 discharges classified as accidental
during FYs 2009 through 2011.''
3. irs conceals details of accidental gun discharges
The agency's lackadaisical approach to firearm safety has
led to easily preventable accidents. The Inspector General
cryptically references IRS accidental discharges that caused
``property damage or personal injury'':
``In three of the four accidental discharges that were not
reported, the accidental discharges may have resulted in
property damage or personal injury.''
The details of these incidents are--for some reason--
redacted in the report:
IRS-CI management is required to be notified when a special
agent discharges their weapon. CI must report all accidental
discharge incidents externally to the TIGTA OI and internally
to the NCITA and the Director of Field Operations. Despite
these directives, CI did not always properly disclose
accidental discharges:
``we found that four accidental discharges were not
properly reported. This included two that were not reported
to both to the TIGTA OI and the NCITA. one that was not
reported to the TIGTA OI, and one that was not reported
internally to the NCITA.''
4. IRS AGENTS DO NOT ALWAYS UNDERGO REMEDIAL TRAINING AFTER DISCHARGES
Madam Speaker, I yield 1 minute to the gentleman from Pennsylvania (Mr. Smucker).
Madam Speaker, I include in the Record the following Joint Committee on Taxation analysis that shows that American manufacturers are hardest hit by the Democrats' made in America tax--$200 billion-- and they will pay over half of that tax.
Congress of the United States,
Joint Committee on Taxation,
Washington, DC, August 11, 2022.
Memorandum
To: Redacted
From: Thomas A. Barthold
Subject: Revenue Estimate
This memorandum is in response to your request for an
estimate of how the burden of the corporate minimum financial
statement income tax as contained in section 10101 of an
amendment in the nature of a substitute to H.R. 5376. ``An
Act to Provide for Reconciliation Pursuant to Title II of S.
Con. Res. 14'' as passed by the Senate on August 7, 2022,
would fall across different industrial sectors.
Business income tax returns ask taxpayers to report the
industry in which they are primarily engaged, identifying the
industry by the code numbers established under the North
American Industrial Classification System (``NAICS code'').
This is self-reported and the Internal Revenue Service does
not verify the accuracy of the classification stated by the
taxpayer. The NAICS code system allows data to be aggregated
at different levels of general categorization. Two-digit
codes are the broadest categorization. For example, code 31
encompasses all manufacturing. As we project that only
approximately 150 taxpayers annually will be subject to the
proposed book minimum tax, in the accompanying table we
generally report results by two-digit reporting to protect
the privacy of the tax return data on which we base our
analysis.
We estimate the corporate minimum financial statement
income tax as contained in the amendment in the nature of a
substitute to H.R. 5376 as passed by the Senate would have
the following effect on Federal fiscal year budget receipts.
Madam Speaker, I yield 1 minute to the gentleman from North Carolina (Mr. Murphy).
Madam Speaker, I include in the Record the following letter of opposition, which represents America's independent natural gas and oil production industry, which says this bill will only exacerbate--make worse--our Nation's energy crisis.
August 11, 2022.
Hon. Nancy Pelosi,
Speaker, House of Representatives,
Washington, DC.
Hon. Kevin McCarthy,
Republican Leader, House of Representatives,
Washington, DC.
Dear Speaker Pelosi and Leader McCarthy: The undersigned
trade associations, representing thousands of businesses
across the United States that collectively employ millions of
Americans, write to express our opposition to the Inflation
Reduction Act (IRA) as passed by the U.S. Senate. Further, we
write to urge you to reconsider policies within the
legislation before proceeding.
The United States has experienced its second consecutive
quarter of negative GDP growth, and American consumers are
facing record high inflation. We share the goal of addressing
climate change, as evidenced in the policies we support and
in the actions that we take every day. However, the
considerable tax increases and new government spending in the
IRA amount to the wrong policies at the wrong time.
We are also facing the most significant global energy
crisis since the 1970's, and U.S. energy security--and that
of our strategic allies abroad--is being put to the test.
Further, U.S. energy costs have increased 40 percent over the
past twelve months, creating a serious strain on American
household incomes.
With these current conditions as the backdrop for this
legislation, there are several specific policies included in
the IRA which are particularly troubling and deserve re-
consideration. We would like to draw your attention to three
such provisions:
1. The IRA imposes a new corporate minimum tax, increasing
taxes on Americans by more than $300 billion over the next 10
years. As President Obama noted in 2009, ``the last thing you
want to do is raise taxes in the middle of a recession.''
2. The IRA imposes an $11.7 billion tax on crude oil and
petroleum products. At a time of record-high energy prices,
Congress should not add additional costs on American energy
companies competing globally.
3. The IRA imposes additional constraints on the ability of
companies to develop and produce the energy that Americans
need to fuel our economy and strengthen our energy security.
This includes increased fees on domestic production and the
establishment of a new $6.3 billion natural gas tax.
Finally, the IRA fails to address permitting reform, which
is desperately needed and is essential to effectively deliver
affordable, reliable energy to consumers in a growing
economy.
To date, neither the House nor the Senate have introduced
comprehensive permitting reform legislation. We urge Congress
to quickly consider and pass permitting reform without delay.
For the above-stated reasons, we express our opposition to
the IRA and request that you reconsider passage of this
legislation.
Sincerely,
American Petroleum Institute; American Exploration and
Production Council; American Fuel & Petrochemical
Manufacturers; Independent Petroleum Association of America;
Energy Workforce & Technology Council; Plumbing-Heating-
Cooling Contractors--National Association; Manufacture
Alabama; The Coalbed Methane Association of Alabama; Arkansas
Independent Producers and Royalty Owners; Arkansas Oil
Marketers Association; California Independent Petroleum
Association; Colorado Oil and Gas Association; West Slope
Colorado Oil & Gas Association; Colorado Wyoming Petroleum
Marketers Association; Associated Industries of Florida;
Florida Independent Petroleum Producers Association; Florida
Natural Gas Association; Florida Petroleum Marketers
Association; Florida Propane Gas Association; Florida State
Hispanic Chamber of Commerce.
Florida Transportation Builders Association; Floridians for
Better Transportation; The James Madison Institute; Georgia
Association of Convenience Stores; Georgia Mining
Association; Illinois Fuel Retails Association; Illinois
Manufacturers Association; Illinois Retail Merchants
Association; Chemistry Industry Council of Illinois; Fuel
Iowa; Kansas Independent Oil & Gas Association; Louisiana
Association of Business and Industry; Louisiana Oil and Gas
Association; Michigan Association of Convenience Stores;
Michigan Oil and Gas Association; Michigan Petroleum
Association; Minnesota Service Station & Convenience Store
Association; Associated Industries of Missouri; New Mexico
Business Coalition; New Mexico Oil and Gas Association.
North Carolina Chamber; North Carolina Petroleum &
Convenience Marketers Association; North Dakota Petroleum
Council; Ohio Energy and Convenience Association; Ohio
Manufacturers Association; Ohio Oil and Gas Association; The
Petroleum Alliance of Oklahoma; Pennsylvania Chamber of
Business & Industry; Pennsylvania Grade Crude Oil Coalition;
Pennsylvania Independent Oil & Gas Association; Pennsylvania
Independent Petroleum Producers; Pennsylvania Manufacturers
Association; South Dakota Petroleum and Propane Marketers
Association; Texas Alliance of Energy Producers; Texas
Independent Producers & Royalty Owners Association; Permian
Basin Petroleum Association; Associated Builders &
Contractors West Virginia; Petroleum Association of Wyoming.
Madam Speaker, I yield 1 minute to the gentleman from Georgia (Mr. Clyde).
Madam Speaker, may I inquire how much time Chairman Neal and I have remaining.
Madam Speaker, I include in the Record this Penn Wharton School of Business analysis that debunks the Inflation Reduction Act, showing how this bill will reduce inflation by less than a tenth of 1 percent in the first 5 years, with zero impact on inflation after that.
[From Penn Wharton]
Senate-Passed Inflation Reduction Act: Estimates of Budgetary and
Macroeconomic Effects
key points
PWBM estimates that the Senate-Passed Inflation Reduction
Act, as written, would reduce cumulative deficits by $264
billion over the 10-year budget window.
The Act would have no meaningful effect on inflation in the
near term but would reduce inflation by around 0.1 percentage
points by the middle of the first decade. These point
estimates, however, are not statistically different from
zero, indicating a low level of confidence that the
legislation would have any measurable impact on inflation.
Relative to current law, the Act would slightly reduce GDP
in the first decade while slightly increasing GDP by 2050.
These estimates include the impact of debt reduction, carbon
reduction, and tax incentives on investments and working
hours.
Most, but not all, of the tax increases fall on higher
income households. However, future generations, including
higher-income households, gain from the improved economy,
including a reduction in carbon emissions.
introduction
On Sunday August 7th, the U.S. Senate passed the Inflation
Reduction Act of 2022 under FY2022 budget reconciliation
instructions. PWBM recently analyzed a previous version of
the bill. We also compared our analysis against that of the
Joint Tax Committee and Congressional Budget Office who use
an older economics baseline from July 2021.
In this brief, PWBM analyzes the budgetary, macroeconomic,
and distributional effects of the final Senate passed
version. In line with the previously released version of the
bill, the Act provides for new spending and tax incentives
related to the adoption of clean energy technology, both at
the industrial and consumer level. It extends a temporary
expansion of Affordable Care Act (ACA) health insurance
subsidies for an additional two years. To offset these
deficit-increasing initiatives, the bill imposes new taxes on
certain businesses, reduces government outlays on
prescription drugs through pricing reforms. It also provides
for new IRS funding which PWBM estimates would increase
revenue collections above new outlays.
provision descriptions and estimated budgetary effects
The final version of the Act makes several key amendments
to the version we previously analyzed. First, the new
corporate minimum tax no longer restricts the tax benefit of
accelerated depreciation, and private equity firms are
exempted from the tax. Second, the carried interest provision
was removed. Third, new revenue raising provisions (a tax on
stock buybacks and a restriction on pass-through loss
deductions) were added. Fourth, due to Senate rules, drug
price inflation caps for private insurance plans were
removed.
More specifically, the Act proposes the following policy
changes:
Extension of expanded ACA subsidies. Extends the temporary
expansion of Premium Tax Credits through 2025. The expansion,
which offers eligibility to households above 400 percent of
the poverty line, is scheduled to expire at the end of 2022
under current law.
Climate and energy provisions. Includes tax rebates and
credits to lower energy costs for households; tax credits,
research, loans, and grants to increase domestic
manufacturing capacity for wind turbines, solar panels,
batteries, and other essential components of clean energy
production and storage; tax credits to reduce carbon
emissions; programs to reduce the environmental impact of
agriculture; a new fee on methane emissions; and more.
Minimum tax on corporations' book income. Creates a new 15
percent corporate alternative minimum tax based on the
financial statement income of corporations with at least $1
billion in such income. Allows for bonus and accelerated
depreciation deductions when calculating taxable book income.
Tax on share repurchases. Imposes a new 1 percent tax on
corporations' net repurchase of stock.
Extension of excess noncorporate losses limitation. Extends
the limitation on the deduction of pass-through losses
through tax year 2028, which under current law is scheduled
to expire at the end of 2026. The maximum deductible loss,
which is indexed to inflation, is $540,000 for married
taxpayers in 2022.
Prescription drug price reforms. Allows Medicare to
negotiate the price of certain prescription drugs; limits the
price growth of certain drugs paid covered under Medicare to
inflation; repeals the implementation of a ``rebate rule''
scheduled to increase drug-related Medicare outlays beginning
in 2027; redesigns Medicare Part D benefit formula and caps
out-of-pocket costs for beneficiaries.
IRS funding. Appropriates approximately $80 billion over
the next decade for IRS enforcement activities including the
hiring and training of new auditors, IT systems
modernization, and taxpayer services.
Table 1 presents PWBM's estimate of conventional budgetary
effects over the 10-year budget window defined in the FY2022
reconciliation instructions. We estimate the Act would reduce
cumulative noninterest deficits by $264 billion from FY2022
through FY2031.
estimated effects on inflation
We estimate that the Inflation Reduction Act as passed by
the Senate would have a very modest impact on inflation over
the next decade. The Act produces some upward pressure on
prices in 2023 and 2024, but its effects are too small to
meaningfully affect measured the Personal Consumption
Expenditures (PCE) inflation rate as reported by the Bureau
of Economic Analysis. The Act would reduce annual inflation
by around 0.1 percentage points in about five years, once
major deficit-reducing provisions of the legislation are
fully implemented, but the Act would have no measurable
impact on inflation after 2028. All these point estimates are
not statistically different from zero, indicating a low level
of confidence that the legislation would have a measurable
impact on inflation.
other macroeconomic effects
Government spending rises because of the climate-related
spending and the extension of the ACA subsidies are greater
than the savings from prescription drug pricing reforms.
However, additional tax revenues are greater than the
spending increases, which leads to a decrease in government
debt. Government debt goes down by 4.1 percent in 2040 and 8
percent in 2050, which crowds-in investment in productive
private capital.
The provisions which increase taxes on business activity
lower the after-tax return to investment, which offsets the
positive effects on investment from lower government debt.
Net of these two effects, private productive capital declines
by 0.2 percent in 2031, is unchanged in 2040 and increases by
0.3 percent in 2050. The drop in productive capital in 2031
leads to a 0.1 percent decline in GDP.
Nonetheless, as government debt declines, private capital
increases by 0.3 percent by 2050, and workers become more
productive. Higher worker productivity is reflected in wages
that increase by 0.1 percent in the same year. Moreover, the
increase in private capital combined with the accumulated
productivity increases from the climate and energy effects,
described in a previous brief, leads to an increase in GDP,
which grows 0.1 percent in 2050.
distributional tax effects: conventional estimates
The Inflation Reduction Act contains a wide array of
subsidies, taxes, and pricing reforms, each with varying
impacts on households and businesses. For example, some large
businesses would face higher tax bills; individuals buying
certain health insurance plans would face lower out-of-pocket
costs; some households who evade taxes would be made to pay;
and pharmaceutical companies would earn lower revenues.
Though not responsible for remitting taxes assessed on
business activity, households bear some of the economic
burden of such taxes. Shareholders receive lower after-tax returns, and workers earn lower wages with fewer productivity-enhancing investments.
Distributional analysis traditionally focuses on the
effects of revenue-raising tax provisions since attempting to
allocate all spending--including for roads, education,
national defense, some transfer programs, and the bill
inherited by future payers for current deficits--is
challenging and subjective. Put differently, distributional
analysis typically is not intended to be a holistic
incidence. Instead, distributional analysis attempts to
estimate answers the narrower question: for a given set of
spending benefits
and change in debt, who finances the costs under the
explicitly stated revenue provisions in the bill? In the case
of this Act, the revenue is raised from the corporate minimum
tax as well as the tax on share repurchases.
Conventional distributional analysis measures the long-run
incidence of tax increases imposed at a single point in time.
PWBM assumes that 75 percent of corporate income taxes are
borne by owners of capital with the remainder borne by
labor--magnitudes consistent with empirical research and
scorekeeping convention. We apply this incidence assumption
when analyzing the corporate minimum tax provision. However,
for the stock buyback tax, we assume that shareholders bear
100 percent of the burden because it is assessed on a
discretionary balance sheet transaction rather than on income
from economic production.
We find that all income groups would bear some of the
additional burden of the 2023 revenue-raising business tax
changes. Average burden ranges from $5 for the lowest
quintile, to $55 for the middle quintile, to $61,520 for the
top 0.1 percent of tax units. At lower incomes, the tax
incidence largely reflects lower wages over time relative to
baseline, whereas at high income the tax incidence mostly
reflects more immediate changes in the value of financial
assets.
distributional effects: dynamic estimates
PWBM's dynamic distribution metric shows how benefits and
costs accrue across generations when accounting for
macroeconomic effects, including the increase in productivity
from lowering carbon emissions relative to baseline. While
this analysis is less granular than conventional
distributional analysis, the dynamic ``equivalent variation''
measure captures important dynamics like lifetime income
trajectories, the ``insurance value'' of means-tested
benefits and changes in wages and returns to capital
investments.
Table 4 reports the equivalent variation for households at
different ages (relative to the year 2022) and incomes. Each
value shown in Table 1 corresponds to the one-time benefit
that the corresponding household receives from the
legislation. For example, the value of -$700 for a household
age 40 in the bottom income quintile indicates that this
household is worse off by $700 under this legislation,
including at age 40 and the remainder of his or her lifetime.
Put differently, this household is indifferent between the
adoption of the Inflation Reduction Act and making a one-time
payment of $700 that avoids the adoption of the Act. However,
a household in the bottom quintile who is born in 20 years
(-20 age in 2022) would be $1,900 better off.
Notice two main effects that vary by both income and
generation:
First, current workers and retirees prefer current law over
the provisions in the Inflation Reduction Act. People alive
today bear the burden of business tax increases in the form
of lower investment returns and lower wages in the near term.
However, future generations gain from the adoption of the
Act, including positive gains to capital formation from
reducing the debt as well as the increase in total factor
productivity from reducing carbon emissions relative to
baseline.
Second, current higher-income households bear a
substantially larger share of the tax burden while future
higher-income households also gain the most from the improved
economy. In the long run, the Inflation Reduction Act leads
to lower government debt, higher wages, higher total factor
productivity and higher GDP. Although older workers and
retirees prefer current law, this growth leads to significant
gains for younger households in all income brackets. As lower
government debt crowds in additional productive private
capital, wages increase. In addition, these younger workers
begin to benefit from the accumulating productivity benefits
from climate investments. Therefore, workers in the future
will receive higher wages and income, which is reflected in
larger equivalent variations for younger cohorts of workers.
Madam Speaker, I yield 1 minute to the gentleman from Tennessee (Mr. Rose).
Madam Speaker, I would note that every Democrat in Congress, in the House and Senate, strongly opposed providing prescription drugs for seniors in Medicare part D, and then-Leader Pelosi at the time said, it would end Medicare as we know it to help seniors with these lifesaving medicines.
Madam Speaker, I include in the Record the following study from the University of Chicago which shows the Democrats' drug pricing scheme and controls could kill up to 342 cures, many of them lifesaving cures, in the next two decades alone.
[From University of Chicago, Sept. 2021]
The Evidence Base on the Impact of Price Controls on Medical Innovation
(By Tomas J. Philipson and Troy Durie)
Executive Summary
This issue brief reviews the evidence on the impact of
price controls on biopharmaceutical innovation and calibrates
what this evidence implies for recent price control proposals
in the US. A large academic literature estimates the effect
of future drug revenues on R&D spending with a mid-range
effect of a 1 percent reduction in revenue leading to a 1.5
percent reduction in R&D activity. Using the range of such
effects found in the literature we find the proposed price
controls of US bill HR3, the Lower Drug Costs Now Act, would
lead to a 29 to 60 percent reduction in R&D from 2021 to 2039
which translates into 167 to 342 fewer new drug approvals
during that period. The mid-range effect of the evidence
implies a 44.6 percent decline in R&D and 254 fewer new drug
approvals. As a benchmark on the large size of the adverse
health effects this implies, we conservatively find the loss
in life from the price controls the next 10 years is 20 times
larger than the loss from COVID-19 to date in the US. We
argue this is a conservatively low estimate of the impact of
such proposals even though it is as much as a ten times
larger reduction in new drugs compared to a recent CBO
analysis.
Section 1: Introduction
A national debate has emerged again about the effect of
price controls on pharmaceutical innovation. Many proponents
of price controls for pharmaceutical drugs argue that they do
not impact innovation while opponents argue they will lead to
fewer new drugs. This issue brief attempts to provide insight
into the likely effects of recent price control proposals by
analyzing how the debate can be informed by basic economics
and the prevailing empirical evidence.
While the United States has less stringent price
regulations when compared to other nations, the Biden
Administration has recently announced plans to lower drug
prices through policies similar to those outlined in a recent
bill referred to as the Lower Drug Costs Now Act (H.R. 3)
that passed the House of Representatives in December 2019 and
was reintroduced in April 2021. This proposal would create
price controls for the government's highest expenditure drugs
and then apply price controls to firms conducting private
sector transactions. This issue brief reviews the evidence on
how sensitive innovation is to changes in revenues and
applies the evidence to estimate the effect of proposed price
controls.
Section 2: Evidence Base on Revenue Effects on Innovation
Biopharmaceutical companies routinely project future market
size and profits for their products to determine the rate of
return on investment (ROI) from R&D. A large body of evidence
suggests that these market practices translate into a
predictable positive relationship between realized revenues
and R&D spending in the economy in general and for biomedical
innovation in particular.
A rich academic literature quantifies this relationship
between future revenues and pharmaceutical innovation. For
assessing evidence related to revenue effects on R&D, it is
important to recognize that global profits drive innovation
and that revenues from different countries have different
effects on those global profits because of different profit
margins across countries. Expected earnings, not revenues,
drive R&D investments. Therefore, decreases in US revenue
will have larger effects on global profits than revenue
losses in price controlled markets in Europe due to higher
profit margins in the US. Goldman and Lakdawalla (2018) find
that pharmaceutical profits in the United States accounts for
64 to 78 percent of global profits, similar to an estimate
from the Council of Economic Advisers (CEA) (2018).
Consequently, the evidence finds that studies focusing on US
revenue losses show larger R&D effects than those studying
revenue losses in Europe.
In particular, a set of papers looks at the expansion of
the Medicare prescription drug benefit, Medicare Part D,
which provides the most relevant evidence for assessing the
revenue effects of Medicare policy changes. They find that
companies recognized this expansion and increased innovation
in drugs treating diseases prevalent in the elderly
population more so than innovation in non-elderly diseases
(Blume-Kohout and Sood 2013). Quantifying that relationship,
a 1 percent increase in market size due to Medicare Part D
leads to a 2.8 percent increase in new drug approvals.
Another often cited paper finds a 1 percent increase in
potential market size leads to a 4-6 percent increase in the
entry of new drugs (Acemoglu and Linn 2004) in the US. Though
other studies have found lower effects in Europe of the
relationship between potential market size and the number of
new treatments, a clear strong positive relationship exists
(Dubois et al. 2015). Other studies show that a 1 percent
increase in price leads to a 0.22-1.33 percent increase in
innovation. Another extensive literature illustrates how
companies change their investments in lower quality drugs due
to price controls and other regulations that decrease how
much can be charged for high-quality drugs.
We synthesized the evidence base by computing the average
R&D elasticity with respect to revenue estimated from 10
different studies looking at the effect of a price change,
expected market, and overall revenue on R&D. Table 1
illustrates the elasticities used from each paper, and the
average elasticity across these 10 studies is 1.54.
Note: Acemoglu and Linn (2004) find an elasticity range of
4-6 based on if all approved including generics are included
or not. We take the midpoint of this range. Abbott and Vernon
(2005) find a price cut of 40 to 50 percent lowers R&D by 30
to 60 percent. Taking the midpoint of these numbers gives a
45 percent price cut leads to a 45 percent decrease in R&D,
or an elasticity of 1.
To assess the impact on the number of new drugs from
reductions in R&D spending, a common approach is to divide
the reduction in R&D spending by an estimate of the costs of
bringing a drug to market. This is a useful approach and
implies a proportional reduction in new drugs to the
reduction in R&D spending regardless of the particular cost
per drug. In other words, using this methodology, a 10
percent reduction in R&D spending leads to 10 percent fewer
drugs regardless of the cost per drug estimate used. The
elasticity of R&D spending with respect to revenue in this
case therefore also represents the elasticity of new drugs to
revenue.
Despite the evidence, there is some debate among law makers
concerning whether revenue or price controls affect
innovation at all. However, the evidence is consistent with
common market practices of biopharmaceutical innovation--a
positive relationship between investment and earnings. Such
market practices include the use of net present value (NPV)
calculations to determine a new drug's ROI. Biopharmaceutical
companies determine the demand for new drug therapies by
analyzing the prevalence of disease, insurance coverage of
the population affected by the disease, and reimbursement by
payers managing patients' care. The pharmaceutical industry
spent more than $91 billion on R&D in 2020. In obtaining such
R&D funding, companies have relied on venture capital
funding, licensing agreements, or mergers and acquisitions as
well as their own revenue. All rely on ROI assessments to
evaluate R&D investments. Indeed, markets routinely assess
the enterprise value of firms by estimating the present value
of expected cash flows across all business lines and
projects.
section 3: Calibration of the Impact on Innovation of Proposed US Price
Controls
This section evaluates what the evidence implies for the
innovation effects of proposed US price controls. We
calibrate that the price controls implemented in the United
States would lead to a 29.2 to 60.0 percent reduction in R&D
from 2021 to 2039. This equates to $952.2 billion to $2.0
trillion in lost R&D spending and 167 to 342 fewer new drug
approvals during this period. This means annual new drug
approvals will be 11.7 to 24.0 percent lower per year from
2021 to 2029 and 45.0 to 92.4 percent lower from 2030 to
2039. We discuss how these findings, as well as findings from
other studies, differ from CBO (2019), which finds only 37
fewer new drug approvals over this time period, which is
550.2 to 1,024 percent lower than our estimates. Our
estimates are conservative as the entire evidence base is
considered and not only the evidence base for the more R&D
sensitive US market.
It should be noted, however, that making comparisons to CBO
estimates is made more difficult due to the highly non-
transparent discussion of their underlying analysis, which
makes third-party replication of their results impossible.
This ``black-box'' nature of analysis is often the case with
government reports and raises larger issues with the
difficulty for private parties and taxpayers--who funded the
analysis--being able to assess their accuracy. In contrast,
we believe the presentation of the evidence discussed above,
and the innovation effects they directly imply, is highly
transparent as it simply documents the findings of the
studies and their implied effects.
3.1 The Proposed US Price Controls
The United States has fewer restrictions on price than
other countries, but the Biden Administration has announced
their goal to lower drug prices through greater price
regulation, as set forth in a recent bill referred to as H.R.
3. This proposal would change the way certain single-source
brand drugs are priced for Medicare beneficiaries by
requiring drug manufacturers to ``negotiate'' drug prices
with the Secretary of Health and Human Services. A
prohibitive excise tax of 65 to 95 percent will be applied to
a company's annual gross sales if they refuse to negotiate,
making the requirement largely equivalent to mandatory price
controls. Drug prices set by the Secretary may not exceed the
prices in specified countries by more than 20 percent and
price increases would be capped at the rate of inflation (CBO
2021).
In addition, these price controls would also be extended to
private transactions by employer-based plans as stated on
August 12, 2021 by President Biden and as implied by the
proposed legislation. Private payers can choose the lower
prices negotiated by the government, which they presumably
will.
3.2 CBO's Estimated Effects and Alternative Estimated Effects
of the Proposed Price Controls
CBO (2019) previously estimated that a drop in future
revenues due to H.R. 3 would lead to 8 fewer drugs from 2020
to 2029, which would then expand to 30 fewer drugs from 2030
to 2039). In August 2021, CBO (2021b) updated its estimated
impact of price negotiations to be 2 fewer drugs in the first
decade (0.5 percent), 23 fewer in the second decade (5
percent), and 34 fewer drugs in the third decade (8 percent).
Since the development process takes about a decade, the long
run effects of the bill will be larger than its short-run
effects. To align these estimates with our time period of
2021-2039, we lower their estimate to 7 fewer drugs from 2021
to 2029 and keep the estimate of 30 fewer drugs from 2030 to
2039.
Consistent with our analysis, other analysts' assessments
of CBO's 2019 analysis of H.R. 3 conclude that CBO (2019)
likely underestimates the impact of H.R. 3. Charles River
Associates (2021) finds the CBO study underestimates the
company revenue impact by assuming companies will be able to
set their price at the high end of the allowed price
range, and that companies will be able to increase their non-
U.S. price. Both assumptions may not be true due to
uncertainty around behavioral responses in negotiations.
Further, for the loss-of-revenue impact on R&D, CBO
extrapolates price control effects from smaller markets, and
they do not account for the larger impact on targeted disease
groups most impacted by the policy like rare diseases and
oncology. CBO's analysis relies on Dubois et al. (2015) to
estimate the effect of H.R. 3 on R&D, but CRA notes that this
estimated effect is smaller than most of the other
literature, too dependent on specific assumptions, and may
not be as relevant to a policy of H.R. 3's magnitude.
Other analysts' estimates of the impact of the price
controls introduced in H.R. 3 show a considerably larger
impact on global revenues and R&D than assumed by CBO.
Stengel et al. (2020) estimate drug manufacturer revenues
would fall 34 to 44 percent, which would equate to about $1.3
to $1.7 trillion in total lost global revenues from 2020-
2029. Vital Transformation (2021) estimates annual earnings
would fall 56 percent, or on average $102 billion a year,
starting in the year 2024. This fall in earnings when fitted
to past data would have lowered new approved drug therapies
in their sample from 68 new drugs to 7 new drugs, an 89.7
percent decline from 2010 to 2019.
3.3 Effects of the Proposed Price Controls Implied by the
Evidence Base
In light of the reported shortcomings in the CBO (2019)
report, we used the broader evidence base discussed in this
issue brief to assess the effect H.R. 3's proposed price
controls would have on innovation. We create a range of the
estimated drop in global drug manufacturer revenues by taking
the CBO's lower estimate of 19 percent and the midpoint
revenue effect of alternative studies, 39 percent, from
Stengel et al. (2020).
As discussed earlier, a conservatively low estimate of the
elasticity of revenue on either R&D or the introduction of
new drugs is 1.5 based on current evidence. We apply this
elasticity to the 19 to 39 percent decline in revenues to
derive a percentage reduction in R&D. This percentage
reduction is thereafter used to calibrate the reduction in
absolute R&D spending or number of approved drugs which is
applied to the CBO baseline trend in absolute values. In
other words, the reduction in R&D spending and the number of
new drug approvals during 2021 to 2039 is obtained by
determining how much would be lost in each of those measures
with the number of approved drugs being compared to CBOs
baseline trends given the percent reduction in R&D. We create
our own trend for R&D spending by taking a time series from
PhRMA's 2021 Membership Survey showing pharmaceutical R&D
spending from 2000-2019 and calculated the compound annual
growth rate to get a trend for expected R&D spending through
2039. We then applied the impact on R&D to each year and
summed these values to get a total. For new drug approvals,
we use the 30 new drug approvals baseline from CBO (2019) and
applied the impact on R&D for each year and summed.
Table 2 illustrates our main findings. Using the average
elasticity on the 19 to 39 percent drop in global revenues,
innovation through R&D is expected to drop 29 to 60 percent.
Using the middle of our range, this would equate to lost R&D
spending of up to $1.5 trillion. We find that this drop in
spending will lead to 167 to 342 fewer new drug approvals.
Our estimates are therefore 550.2 percent to 1024.0 percent
larger than CBO (2019)'s estimated 37 fewer new drug
approvals, adjusted to our time period. CBO (2019) points out
that lower R&D spending will take time to be reflected in new
drug approvals due to the long development process, so the
reduction in revenue results in 7 fewer new drug approval,
18.9 percent of their total estimate, in the first 9 years
and 30 more in the following decade, 81.l percent of their
total estimate. We assume this breakdown as well, so new drug
approvals will fall by 32 to 65 approvals from 2021 to 2029
and 135 to 277 approvals from 2030 to 2039. These significant
drops in new drug approvals will lead to delays in needed
drug therapies, resulting in worse health outcomes for
patients.
The failure to discover and get new drug approvals leads to
worse health outcomes. CEA (2019) did an early analysis of
H.R. 3 finding 375 million to 100 million life years lost due
to this policy's impact on R&D spending through 2029. For
comparison, using death data through September 22, 2021,
SARS-CoV-2 has directly reduced health outcomes by 7.5
million life years. The 7.5 million life years lost is only
just over 10 percent as large as the midpoint of CEA (2019)'s
estimate due to H.R. 3. We calculate this loss in life years
by applying life expectancy estimates conditional on age from
CDC to the age distribution of deaths from SARS-CoV-2 from
CDC updated through September 22, 2021. Then we multiply the
life expectancy at each age grouping by the number of deaths
and sum to get 7.5 million life years lost. A prior study
shows how every $2,000 spent on pharmaceutical research and
development increases population health by one statistical
life-year (Lichtenberg 2002). When applied to our R&D
spending estimates, this would lead to 159.3 million to 326.9
million life years lost by 2029 which increases to 476.1
million to 977.2 million by 2039. This amounts to the direct
negative health effects of SARS-CoV-2 to be only 3.1 percent
as large as our midpoint estimate by 2029 and 1.0 percent as
large by 2039. Price controls have significant health costs
to the U.S. population.
Our analysis likely underestimates true innovation effects,
which, if considered fully could make our findings even
further away from the CBO estimates. This is because the
average R&D elasticity of 1.5 used included studies of non-
U.S. markets with lower earnings effects than U.S. markets.
Given that the U.S. has higher margins, price controls are
expected to have a larger impact on earnings. Thus, only
using the larger estimated elasticities from U.S. markets,
which would double the elasticity of 1.5, would yield
proportionally larger differences between the evidence base
and the CBO estimates.
Madam Speaker, I yield 1 minute to the gentleman from Florida (Mr. Rutherford).
Madam Speaker, I insert in the Record the following analysis which shows the top 10 manufacturing industries hit hardest by the Democrats' made-in-America manufacturing tax. These are predominantly minority communities and working-class Americans.
Madam Speaker, I yield 1 minute to the gentleman from Ohio (Mr. Davidson).
Madam Speaker, I include in the Record the following editorial from The Wall Street Journal, which shows this bill will only reduce global temperatures by, at best, 0.028 degrees Fahrenheit throughout this century and as little as 0.0009 degrees over the entire century.
[From The Wall Street Journal]
Tilting at Climate Windmills
Nearly all of Washington--Democrats, the press, lobbyists--
is taking a victory lap with Senate passage of the Schumer-
Manchin tax, climate and drug price control bill. The climate
lobby is especially thrilled, claiming a historic victory
that will reduce temperatures, hold back the rising sea, and
save the planet.
Or, maybe not. Our contributor Bjorn Lomborg looked at the
Rhodium Group estimate for CO2 emissions reductions from
Schumer-Manchin policies. He then plugged them into the
United Nations climate model to measure the impact on global
temperature by 2100. He finds the bill will reduce the
estimated global temperature rise at the end of this century
by all of 0.028 degrees Fahrenheit in the optimistic case. In
the pessimistic case, the temperature difference will be
0.0009 degrees Fahrenheit.
In other words, the climate provisions in this ballyhooed
legislation will have no notable impact on the climate.
This isn't surprising. No matter what the U.S. does to
reduce greenhouse-gas emissions, it will be dwarfed by what
the rest of the world does. China, India and Africa aren't
about to stop burning fossil fuels as they develop, and China
is sprinting ahead to build huge new coal capacity despite
its pledge to start reducing emissions after 2030.
Barring a breakthrough in battery or other technology,
carbon emissions will continue to increase. No one knows how
much the Earth's temperature will warm, though even the U.N.
model has modified its estimates from the apocalyptic
predictions of some years ago.
Schumer-Manchin won't reduce inflation, won't reduce the
budget deficit, and it won't reduce the world's temperature.
What it will do is transfer some $369 billion from taxpayers
and drug companies to the pockets of green energy businesses
and investors. It will tighten the hold that politicians have
on the allocation of capital, as they pick winners and losers
with their grants and tax credits. Everyone will get a nice
warm feeling as they pretend they are cooling the climate.
Madam Speaker, I yield 1 minute to the gentlewoman from New York (Ms. Malliotakis).
Madam Speaker, I include in the Record the following article by Americans for Tax Reform, which debunks the Inflation Reduction Act by describing the top five budget gimmicks in this bill, showing over $330 billion in fake savings, more than the so-called deficit reduction in the bill.
5 Gimmicks in Democrats' Reconciliation Bill
Democrats' reconciliation bill, improperly named the
``Inflation Reduction Act,'' contains numerous gimmicks
designed to deceive voters and circumvent congressional
rules.
This bill uses several budget gimmicks: a short extension
of Obamacare subsidies, a repeal of the ``rebate rule'' that
never has nor never will go into effect, and supersizing the
Internal Revenue Service (IRS) to ``solve'' an overstated tax
gap, This bill attempts to circumvent the Byrd rule by
erroneously calling a mandate ``a tax.'' The bill would also
violate President Biden's tax pledge to not raise taxes on
anyone making less than $400,000 a year.
1. The Obamacare subsidies in this bill are only extended until 2025,
despite expectations that they will be extended again.
In the American Rescue Plan (ARP), President Biden and
congressional Democrats expanded Obamacare subsidies--
specifically the advanced refundable premium tax credit--by
increasing benefits for households at every income level and
expanding them to households earning more than 400 percent of
the federal poverty level. Because these enhanced benefits
are set to expire later this year, Democrats are attempting
to extend them through 2025 in this legislation.
Once these expanded subsidies have been in place for five
years total, it will be extremely difficult to get rid of
them. Given the high likelihood--and expectation--that these
subsidies will be extended once they're set to expire again,
the three-year extension is a clear gimmick.
If the expanded subsidies were extended indefinitely, the
10-year budget deficit reduction falls from $248 billion to
$89 billion, according to the Penn Wharton Budget Model.
2. The bill repeals the ``rebate rule,'' despite the fact that it was
never going into effect.
Under the Trump administration, the HHS released the rebate
rule which sought to lower drug prices by altering payments
from drugmakers to pharmacy benefit managers. The Trump
administration never went through with this rule nor has the
Biden administration taken it back up again (to be clear,
they never will).
Even so, Democrats claim the repeal would reduce the
deficit by $120 billion. Clearly, it would not.
Already, between the likely extension of Obamacare
subsidies and this rebate rule, the bill doesn't actually
reduce the deficit at all.
3. The IRS would be supersized to solve an overstated ``tax gap.''
The Joint Committee on Taxation estimates that $80 billion
in additional funding to the IRS would increase tax revenue
by $125 billion. While increasing tax enforcement would
certainly raise more money from unsuspecting small
businesses, the Left has assumed that this can and will be
done through increased enforcement on the wealthy.
In reality, wealthy individuals and large corporations are
almost always tax compliant. The wealthy and large
corporations already have armies of lawyers and accountants
that ensure they legally take advantage of the plethora of
credits and deductions offered by the tax code. Further, the
IRS already audits the largest corporations at high rates. It
doesn't matter how much more the agency receives in funding--
they will not find violations in the law that do not exist.
Thus, the IRS won't find much more revenue from their big
targets.
Additional funding will instead be used for invasive, time-
consuming, and non-fruitful audits of middle-class Americans
and small businesses. The IRS previously announced a goal to
increase small business audits by 50 percent.
As previously reported by CNBC, experts say a fattened-up
IRS would go after small businesses that necessarily depend
on cash transactions.
4. The bill implements price controls through a 95 percent tax,
The bill would give the Health and Human Services Secretary
the authority to ``negotiate'' the price of prescription
drugs on behalf of Medicare. By ``negotiation,'' Democrats
mean drug manufacturers will pay a 95 percent excise tax on
prescription drug profits unless they accept price controls
set by the Department of Health and Human Services (HHS). In
2023, the Secretary would be able to determine the prices of
10 prescription drugs. The determined price would go into
effect in 2026. The number of drugs the HHS Secretary could
set prices for would then increase to 15 in 2028 and 20 in
2029.
That tax itself is forecasted to raise zero revenue.
Neither the JCT analysis nor any independent analyses
estimate that any company would pay this exorbitant tax. A 95
percent ``tax'' on revenue is just a stick to enforce a
mandate for government price controls. This is a way to
circumvent the Byrd rule, which requires that all the
provisions in a reconciliation bill directly change federal
spending or revenue. While a tax is obviously protected under
this rule, it's not clear that mandates of this kind are.
5. The reconciliation bill raises taxes on those making less than
$400,000, violating President Biden's tax pledge.
Throughout the ten-year window, the JCT estimates that
nearly every single income group will see their taxes raised.
Those Americans making less than $200,000 will see their
taxes raised by nearly $17 billion. For those making between
$200,000 and $500,000 (as the JCT doesn't cut off brackets at
$400,000), their taxes would increase by another $14 billion.
Senate Finance Ranking Member Mike Crapo (R-Idaho) rightly
points out that at least half of all new tax revenue raised
by this bill would come from those earning under $400,000.
Clearly, this tax hike violates President Biden's pledge
not to raise one penny of taxes on any American earning less
than $400,000 per year.
If Biden and Harris want to keep their pledge, they must
veto the bill or instruct Democrats to change the bill.
I yield 1 minute to the gentleman from Tennessee (Mr. Fleischmann).
Madam Speaker, I include the following polling reality study in the Record, which shows that once Americans learn the details of the so-called Medicare negotiation, which is price setting, that their choices and access to lifesaving cures will be limited, public support for negotiation plummets.
Analysis: Americans Don't Support Surrendering Innovation for
Democrats' Drug Price Controls
Democrats are selling their socialist drug pricing scheme
as a way to lower prices, but Americans oppose it once they
learn that this kills cures and life-improving treatments.
What they aren't telling you is this: Their drug price
control scheme will kill innovation, mean fewer new
treatments and cures, and a loss of jobs in the biopharma
industry.
Once Americans learn about these consequences they reject
it outright. Furthermore, this isn't a ``negotiation''--
Democrats' proposal has Washington dictate prices under
threat of exorbitantly higher taxes on medical innovators.
Key Takeaways:
The vast majority of Americans oppose government negotiation
if it results in fewer new medicines being developed in
the future
A 50-state Morning Consult/PhRMA poll shows two thirds of
Americans oppose price controls if they put the government in
charge and take away power from doctors to prescribe
medicines that best meet the needs of patients.
The Kaiser Family Foundation also finds that Democrats'
price control scheme drops in popularity the moment
respondents see that it could lead to less research and
development of new drugs or limit access to newer
prescription drugs.
A March 2022 Ipsos/PhRMA poll reveals only 14 percent of
Americans support Washington price controls if they limit
their access to newer prescription medicines. Even if it
``only'' delays access, only 15 percent support the proposal
then.
The same poll shows that seniors are even more skeptical--
10 percent support the price controls when they learn of how
it delays people's access to new medicines.
Numerous studies show the proposal would kill new treatments,
including a University of Chicago study that shows the
number going up to 342
Democrats' price-fixing scheme would kill up to 342 cures,
according to a study by the University of Chicago, yet they
claim it's merely a ``negotiating'' approach that would lower
the price of drugs.
A new study from Vital Transformation finds that if drug
price controls under consideration in the Senate had been
enacted during the last decade, only six of 110 currently
approved therapies would have made it to patients.
Madam Speaker, I yield 1 minute to the gentleman from Texas (Mr. Gohmert).
Madam Speaker, on behalf of many diabetes patients, I include the following article in the Record, which includes a quote from my fellow Texan, Representative Lloyd Doggett, where he accurately states that the insulin caps policy included in this bill ``does not lower the price of insulin by one penny,'' but, rather, shifts costs to others.
Insulin Copay Cap Passes House Hurdle, But Senate Looks for a Broader
Bill
(By Michael McAuliff)
The chances of passing election-year legislation to help
people afford insulin--which weeks ago seemed mired in
political fighting--are looking brighter as a bipartisan
effort to tackle the issue takes root in the Senate.
That effort is still in the early stages, but it is moving
forward with the support of Senate Majority Leader Chuck
Schumer, who tapped Sens. Susan Collins (R-Maine) and Jeanne
Shaheen (D-N.H.) to craft a compromise that members of both
parties could accept. Adding pressure to the Senate's efforts
was a vote by the House on March 31 to pass a different bill
that caps out-of-pocket insulin costs for many patients with
insurance at $35 a month.
Collins said in an interview March 30 that the two senators
had come up with an outline based on a bill they worked on
three years ago that goes beyond capping what diabetes
patients pay and aims to bring down the prices drugmakers
charge.
``It tackles the broader issue of the high list price for
insulin, and the conflicts of interests that occur in the
chain from manufacturer to the consumer buying it at the
pharmacy counter,'' Collins said.
The idea of reducing patients' out-of-pocket insulin costs
is immensely popular, and more than half of the public sees
it as a ``top priority'' for Congress, according to a KFF
poll out last week.
It had been a key selling point of President Joe Biden's
Build Back Better plan, but when that legislation stalled,
Biden and Schumer gave Sen. Raphael Warnock (D-Ga.) an open
lane to promote a stand-alone measure identical to the House
bill that caps insulin costs at $35 a month for people with
private insurance and Medicare coverage.
The political climate, however, presented roadblocks. The
odds that a bill sponsored by a Democrat facing a tough
reelection in the fall could get enough Republicans in the
Senate on board seemed slim, and even some Democrats were
nervous about stripping the insulin provisions from a
possible revised version of the Build Back Better bill. So
Schumer embraced a different option from Collins and Shaheen
that would include a cap on out-of-pocket costs and possibly
draw more votes.
Insulin prices have spiked dramatically since the early
2000s, with Americans paying 10 times what people in other
developed countries pay.
Although Collins said details are still being worked out,
her legislation would be based on the pair's earlier bill,
the Insulin Price Reduction Act of 2019, which aimed to roll
insulin costs back to what they were in 2006. It would have
done that by barring rebate payments for insulin to pharmacy
benefit managers--those intermediaries who negotiate price
breaks for insurance companies and determine which drugs the
insurance plans cover.
Collins and other critics of PBMs believe they inflate
prices because they favor higher-priced drugs from which they
can extract a larger rebate and therefore more profit, which
gives drugmakers extra incentive to raise list prices.
Under that 2019 plan, drug manufacturers who agreed to
return to 2006 costs could then raise prices each year only
at the rate of medical inflation. The senators estimated the
plan would lead to a 75 percent cut in prices from those
listed in 2020.
``There's a very complex system which essentially
encourages high list prices, because the pharmacy benefit
managers frequently receive a percentage of the list price,''
Collins said. ``So their incentive is to choose one that is
higher-cost. And so we are trying to address that broader
issue, as well as looking at the out-of-pocket costs.''
Warnock's proposal to cap the cost of insulin is silent on
list prices and benefit managers, an omission some Democrats
complained about even as they voted for the similar bill in
the House. They noted that since insurers would likely be
forced to absorb the costs no longer paid by patients, the
companies would likely raise premiums.
``This bill does not lower the price of insulin by one
penny,'' said Rep. Lloyd Doggett (D-Texas). ``It just shifts
the burden of paying for the insulin off of the shoulders of
insured insulin users, and shifts it on to the rest of all of
us who are paying insurance premiums.''
Collins also noted that the uninsured would not benefit
from the House cap, which applies to Medicare and insurance
companies but doesn't affect drugmakers' prices.
``It doesn't help someone who's uninsured,'' Collins said.
``When you address the high list price, then it's going to
help more people.''
Collins warned that much could change as lawmakers keep
working with various stakeholders on a final bill, including
diabetes advocacy groups, the Centers for Medicare & Medicaid
Services, and the Congressional Budget Office. And as caps on
out-of-pocket expenses and list-price changes start
interacting, things get complicated, indeed.
``We're talking to CBO, which says it's so complex that
they need a new model,'' Collins said.
The politics also remains tricky. Collins and Shaheen never
got their measure close to the Senate floor in 2019 and 2020
when Senate Minority Leader Mitch McConnell was majority
leader. They did attract some praise from both sides of the
aisle, and conservative North Dakota Republican Sen. Kevin
Cramer was a co-sponsor.
While that opens the door to GOP support, Collins said she
was still only at the stage of circulating among her
colleagues what she called a discussion draft.
Republicans in the House who voted against the $35-cap bill
panned it as a political stunt, saying Democrats should have
advanced ideas that had been worked on with Republicans.
Such objections could not block the bill in the House. But
in the Senate, Democrats command only 50 votes, and it would
take 60 to pass the legislation.
Although GOP members of the upper chamber might also be
opposed to Warnock's bill, one of the House sponsors argued
that having the House advance a dramatic cut in insulin
costs--with the support of only a dozen Republicans--would
raise the stakes for the Senate.
``If 10 Republicans stand between Americans being able to
get access to insulin or not, that's a good question for 10
Republican [senators] to have to answer when they go back
home,'' Rep. Dan Kildee (D-Mich.) said ahead of the House
vote. ``So we're gonna pass this bill, and this will put the
pressure on the Senate to act.''
He and his fellow Democratic co-sponsors also signaled
their willingness to take a measure that included the Shaheen
and Collins additions.
``Any train that's leaving the station that gets folks
affordable insulin--I'm open to any vehicle,'' Kildee said.
``We think this is a solution that would work. How it gets to
the president's desk, I'm agnostic on that question. Any way
we can get it there.''
Madam Speaker, I yield 1 minute to the gentleman from Ohio (Mr. Jordan).
Madam Speaker, on behalf of seniors who rely on generic drugs, I include in the Record the following letter from generic and biosimilar manufacturers, which explains the price controls in this Democrat bill will reduce competition from lower-cost generic and biosimilar medicines. That means fewer options for patients and worsening drug shortages.
The Biosimilars Council,
Washington, DC, July 11, 2022.
Hon. Charles E. Schumer,
Majority Leader, U.S. Senate,
Washington, DC.
Dear Leader Schumer: The Association for Accessible
Medicines (AAM) and its Biosimilars Council share in the goal
of lowering prescription drug costs for America's patients
and seniors. However, in an effort to target high prices on
brand-name drugs, the proposed prescription drugs reforms--in
particular the Medicare negotiations framework--being
considered as part of a revised reconciliation package will
reduce patient savings from lower-cost generic and biosimilar
medicines. Even though competition from generic and
biosimilar medicines is the only proven solution to
consistently lower the cost of prescription drugs, the
proposed price setting scheme will reduce competition, harm
future savings from generic and biosimilar medicines, and
increase costs for employers and patients with private
insurance. We thus urge all U.S. Senators to oppose the
prescription drug reforms under consideration as part of a
revised Build Back Better reconciliation package.
America's patients rightfully expect Congress to address
the ever-increasing prices of brandname prescription drugs.
High launch prices on new brand biologics, combined with an
increasing trend of anti-competitive patent and rebate ploys
designed to delay or prevent competition from more affordable
biosimilars and generics, are keeping access to medicines out
of reach for too many patients. These dynamics are compounded
by flawed policies that reward health plans and pharmacy
benefit managers (PBMs) for the use of high-cost, high-rebate
brand drugs and that allow plans and PBMs to raise out-of-
pocket costs for generics, even as the prices for those same
generics are falling. As a result, patients, including
Medicare's seniors, are missing out on billions of dollars in
savings from biosimilars and generic drugs each year.
However, the proposed price setting approach fails to
adequately address these challenges, while dampening future
competition and reducing savings from generic and biosimilar
medicines.
Negotiations Framework Increases Uncertainty for Generic and Biosimilar
Developers
The proposal increases the risks associated with developing
generic and biosimilars without addressing the fundamental
barriers to competition from lower-cost medicines, such as
abuses of the patent system and brand rebate traps. The
proposed timelines for when the Secretary can initiate the
price setting process will significantly increase the risk to
develop new lower-cost generics and biosimilars. Although the
proposal exempts drugs with generic or biosimilar competition
from the price setting process, the bill only does so through
unrealistic timelines for that competition to enter the
market. For many complex generics and biosimilars, it can
take 8-10 years to develop new, more affordable medicines.
And it can take many more years to conclude patent litigation
and then launch a complex generic or biosimilar medicine. But
the new price setting process would not begin until years
after a developer commits to developing a lower-cost generic
or biosimilar. This means that generic and biosimilar
manufacturers will have no way to know whether a brand-name
drug will be selected for negotiation or what the negotiated
price may be. This dynamic fundamentally changes the ability
of generic and biosimilar manufacturers to plan and make
investment decisions that can be up to and exceed $250
million per drug.
While the revised bill includes a provision that could
allow for a temporary delay of the negotiated price if the
Secretary determines a biosimilar launch was imminent, there
are a number of limitations on the provision make it
difficult to utilize. By way of example, a biosimilar
developer would need to show a ``high likelihood'' of
biosimilar competition by a ``clear and convincing''
evidentiary standard. Moreover, the narrow two-year window to
launch does not appropriately account for how long it takes
developers to challenge brand-name patents. Large patent
estates and time-consuming patent litigation are currently
and will continue to prevent biosimilars from being able to
launch within two years of receiving FDA approval. These
dynamics will likely deter manufacturers from making
investments in biosimilar and generic medicines in some
instances--and will result in less competition and ultimately
higher costs for patients.
Generic and Biosimilar Medicines Savings Exceeds Potential from
Negotiations Framework
After years of high-risk investment, biosimilar developers
are poised to deliver tremendous savings to the U.S. health
care system, improving access for patients and lowering
prescription drug costs. New
biosimilars are expected to launch for a range of treatments
for patients with diabetes, arthritis, macular degeneration,
oncology and more. In the next few years, 42 biosimilars are
on track to launch. Gold-standard data firm IQVIA estimates
biosimilar savings of $30 billion annually as a result. In
comparison, the Congressional Budget Office estimates the
negotiations framework saves $18-24 billion per year from
2028 to 2031. Thus, more savings is projected from market-
based competition than from the Build Back Better proposal
and it starts now. In addition, as more complex generics,
biosimilars, and interchangeable biologics become available,
there is the potential for even greater savings to the U.S.
health care system as providers and payers take advantage of
the opportunities to increase access and reduce costs for
patients.
Negotiations Framework Increases Costs on Employers and Patients with
Private Coverage
Reduced competition from generic and biosimilar medicines
impacts all patients, not only Medicare beneficiaries. The
dampening effect this legislation would have on competition
would cause employers and patients with private insurance to
lose savings these populations have historically enjoyed from
robust generic competition and growing biosimilar
competition. Instead, there may be fewer new, more affordable
generic and biosimilar medicines, leaving the commercial and
employer markets captive to the high cost of brand-name
drugs.
When reviewing a nearly identical proposal in the House-
passed Build Back Better Act, AAM's Biosimilars Council
assessed the potential lost savings to the commercial market
for medicines used to treat asthma (Xolair) and rheumatoid
arthritis (Orencia), as examples. For just two products, lost
savings would be between $4-$7 billion between 2027-2030.
This is lost savings that would otherwise be used to lower
patient out of pocket costs and reduce insurance premiums for
employers and employees.
For these reasons, we must oppose the Medicare negotiations
framework and its impact on patient access to lower-cost
medicines. There are other bipartisan steps to address patent
abuse and brand rebate traps that are already under
discussion in Congress that can meaningfully reduce drugs
costs without harming generic and biosimilar savings. We
strongly encourage Congress to reconsider its approach.
Sincerely,
Dan Leonard,
President and CEO.
Madam Speaker, I yield 1 minute to the gentleman from Tennessee (Mr. Burchett).
Madam Speaker, I yield myself the balance of my time.
I include in the Record the following list of 586 credible voices of opposition to this bill. They include business leaders, taxpayer advocates, economists, and thought leaders who all say this bill will hurt Americans if passed today.
BBB2.0/ IRA Groups Opposed
Alvere; American Action Forum; American Benefits Council;
American Coalition for Taxpayer Rights; American Enterprise
lnstitute; American Experiment; American Exploration &
Production Council (AXPC); America First Policy Institute
(AFPI); Americans for Prosperity KEY VOTE; American Petroleum
Institute; Americans for Prosperity; Americans for Tax Reform
KEY VOTE; Americans for Tax Reform KEY VOTE; Amgen; Arizona
Chamber; Associated Builders & Contractors (ABC); Associated
General Contractors of America; Association for Accessible
Medicines (AAM); Association for Accessible Medicines (AAM);
Association of Mature American Citizens (AMAC).
AstraZeneca Pharmaceuticals LP; Beer Institute; Biocom
California; Biotechnology Innovation Organization (BIO);
Biotech Leaders (RA Capital Management, Viscient Biosciences,
No Patient Left Behind, Bay City Capital); Boehringer
Ingelheim; Business Roundtable; Bristol Myers Squibb;
California Biotech CEOs; California Life Sciences; Can
Manufacturers Institute; Catholic Vote KEY VOTE; Center for a
Free Economy; Center for Individual Freedom 2021; Center for
Urban Renewal and Education; Coalition of Minority Owned
Businesses (2021); Coalition of 14 Real Estate Organizations
(2021); Competitive Enterprise Institute (2021); Concerned
Women for America KEY VOTE.
Council for Affordable Health Coverage; Council for
Citizens Against Government Waste; Council of State
Bioscience Associations; Club for Growth; CTIA; CURE: Center
for Urban Renewal and Education; Domestic Energy Producers
Alliance; Eli Lilly & Company; Exelon; Family Research
Council KEY VOTE; FDA Law Blog; Freedomworks KEY VOTE;
Gilead; Genentech; Heritage Action KEY VOTE; Heritage
Foundation (2021); Independent Electrical Contractors;
Independent Petroleum Association of America (IPAA);
Independent Women's Forum; Job Creators Network.
Juneau Oil and Gas; Koch Network; The Libre Initiative;
Main Street Employers; AAHOA; AICC, The Independent Packaging
Association Air Conditioning Contractors of America; American
Building Materials Alliance (ABMA); American Hotel and
Lodging Association; American Pipeline Contractors
Association; American Supply Association; Associated Builders
and Contractors; Associated Equipment Distributors;
Associated General Contractors of America; Brick Industry
Association; Ceramic Tile Distributors Association;
Construction Industry Round Table; Convenience Distribution
Association; Distribution Contractors Association; Education
Market Association; Family Business Coalition.
Financial Executives International (FEI); Foodservice
Equipment Distributors Association; Forest Resources
Association; Heating, Air-conditioning, & Refrigeration
Distributors; International Illinois Farm Bureau; Independent
Bakers Association; Independent Electrical Contractors;
Independent Insurance Agents & Brokers of America;
Independent Office Products & Furniture Dealers Association;
International Association of Plastics Distribution (IAPD);
International Foodservice Distributors Association
International Housewares Association; Main Street Employers
Coalition Manufactured Housing Institute; Material Handling
Equipment Distributors Association; Metals Service Center
Institute; National Association of Electrical Distributors;
National Association of Home Builders; National Association
of Professional Insurance Agents; National Association of
Sporting Goods Wholesalers; National Association of
Wholesaler-Distributors; National Cattlemen's Beef
Association; National Community Pharmacists Association.
National Federation of Independent Business (NFIB);
National Grocers Association; National Independent Automobile
Dealers Association (NIADA); National Lumber & Building
Material Dealers Association; National Marine Distributors
Association; National Onion Association; National Restaurant
Association; National Roofing Contractors Association;
National Stone Sand and Gravel Association; National Wooden
Pallet & Container Association Nebraska Cattlemen; North
American Association of Food Equipment Manufacturers (NAFEM);
North American Equipment Dealers Association (NAEDA); Oregon
Cattlemen's Association; Outdoor Power Equipment and Engine
Service Association Plumbing-Heating-Cooling Contractors--;
National Association Power and Communication Contractors
Association; Reserve Organization of America (ROA) Retail
Bakers of America; S Corporation Association; Small Business
& Entrepreneurship Council Society of Collision Repair
Specialists (SCRS); Spray Polyurethane Foam Alliance.
Subchapter S Bank Association; Textile Care Allied Trades
Association; The Hardwood Federation; Tile Roofing Industry
Alliance; Truck Renting and Leasing Association; WASDA--Water
and Sewer Distributors of America Western States; Roofing
Contractors Association; Wisconsin Grocers Association;
Wisconsin Small Businesses United Wyoming Farm Bureau
Federation; Wyoming Farm Bureau Federation; Managed Funds
Association; March for Life Action KEY VOTE; Merck; National
Association of Home Builders; National Association or
Manufacturers (NAM); National Association of Small Trucking
Companies; National Association of Wholesaler-Distributors;
National Black Chamber or Commerce (2021); Nebraska Farm
Bureau; NFIB.
National Multifamily Housing Council (2021); National
Restaurant Association; National Right to Life KEY VOTE;
National Taxpayers Union KEY VOTE; National Taxpayers Union
KEY VOTE; National Taxpayers Union KEY VOTE; National Venture
Capital Association; Nebraska Farm Bureau; Novartis; Novo
Nordisk; Pacific Research Institute; Paragon Health
Institute; 31 Pharmaceutical CEOs (CA); PhRMA; Pfizer; Pink
Sheet: Informa Pharma Intelligence; Rapport: Biotech; Real
Estate Roundtable; R Street Institute; Sanofi.
Small Business and Entrepreneurship Council; States Trust;
Susan B. Anthony Pro-Life America KEY VOTE; Taxpayers
Protection Alliance (2021); Taxpayers Protection Alliance;
USA Retirement; U.S. Chamber of Commerce; U.S. Natural Gas
and Oil Industry Trade Groups; American Exploration and
Production Council (AXPC);
American Fuel & Petrochemical Manufacturers (AFPM); American
Petroleum Institute (API); Arkansas Independent Producers and
Royalty Owners; Arkansas Oil Marketers Association;
Associated Builders & Contractors West Virginia; Associated
Industries of Florida; Associated Industries of Missouri;
California Independent Petroleum Association (CIPA);
Chemistry Industry Council of Illinois; Colorado Oil and Gas
Association; Colorado Wyoming Petroleum Marketers
Association.
Energy Workforce & Technology Council; Florida Independent
Petroleum Producers Association; Florida Natural Gas
Association; Florida Petroleum Marketers Association; Florida
Propane Gas Association; Florida State Hispanic Chamber of
Commerce; Florida Transportation Builders Association;
Floridians for Better Transportation; Fuel Iowa; Georgia
Association of Convenience Stores; Georgia Mining
Association; Illinois Fuel Retails Association; Illinois
Manufacturers Association; Illinois Retail Merchants
Association; Independent Petroleum Association of America;
Kansas Independent Oil & Gas Association (KIOGA); Louisiana
Association of Business and Industry; Louisiana Oil and Gas
Association; Manufacture Alabama; Michigan Association of
Convenience Stores.
Michigan Oil and Gas Association; Michigan Petroleum
Association; Minnesota Service Station & Convenience Store
Association; New Mexico Business Coalition; New Mexico Oil
and Gas Association; North Carolina Chamber; North Carolina
Petroleum & Convenience Marketers Association; North Dakota
Petroleum Council; Ohio Energy and Convenience Association;
Ohio Manufacturers Association; Ohio Oil and Gas Association;
Pennsylvania Chamber of Business & Industry; Pennsylvania
Grade Crude Oil Coalition; Pennsylvania Independent Oil & Gas
Association (PIOGA); Pennsylvania Independent Petroleum
Producers; Pennsylvania Manufacturers Association; Permian
Basin Petroleum Association; Petroleum Association of Wyoming
(PAW); Plumbing-Heating-Cooling Contractors--National
Association; South Dakota Petroleum and Propane Marketers
Association; Texas Alliance of Energy Producers; Texas
Independent Producers & Royalty Owners Association (TIPRO);
The Coalbed Methane Association of Alabama; The James Madison
Institute; The Petroleum Alliance of Oklahoma; West Slope
Colorado Oil & Gas Association; WSJ Editorial Board.
I include in the Record the following letter from dozens of Main Street businesses opposing the Democrats' bill because of the IRS' targeting of their business under the bill and tax hikes on small businesses.
August 11, 2022.
Hon. Nancy Pelosi,
Speaker of the House,
House of Representatives,
Washington, DC.
Hon. Kevin McCarthy,
House Minority Leader, House of Representatives,
Washington, DC.
Hon. Charles Schumer,
Senate Majority Leader, U.S. Senate,
Washington, DC.
Hon. Mitch McConnell,
Senate Minority Leader, U.S. Senate,
Washington, DC.
Dear Speaker Pelosi, Leader McCarthy, Leader Schumer, and
Leader McConnell: The undersigned organizations represent
millions of Main Street businesses and employ tens of
millions of workers and we oppose the Senate-passed Inflation
Reduction Act.
Inflation is at 40-year highs, we have had two consecutive
quarters of negative economic growth, and we are witnessing a
shrinking small business sector, yet the Inflation Reduction
Act does nothing to address these immediate issues even as it
increases the burden of the tax code shouldered by America's
small and family-owned businesses.
The Biden Administration claims the savings in the IRA are
``front-loaded'' and will reduce the deficit in the short-
term, helping to ease inflationary pressures. That is simply
not the case. Recent analysis by the Congressional Budget
Office, Penn-Wharton, and others shows the Inflation
Reduction Act would increase prices in the short term and do
little to bring them down in the long run.
At the same time, the bill would give the IRS an additional
$80 billion in funding, more than half of which would pay for
thousands of additional IRS agents to conduct millions of
additional audits. We support addressing the tax gap and
oppose illegal tax evasion, but as former National Taxpayer
Advocate Nina Olson observed recently, it is wrong and
counterproductive to characterize the entire tax gap as
willful tax evasion. From experience, we know many, if not
most, of these additional audits will be conducted on the
owners of family businesses who have fully complied with the
tax code.
Finally, the Warner Amendment adopted at the last minute
presented the Senate with a clear choice between Wall Street
and Main Street, and the Senate chose Wall Street. The
amendment extends for two years the Section 461(l) cap on
losses a business owner is permitted to claim. This $52
billion tax hike on pass-through businesses was adopted with
almost no consideration, and the revenues it raises were used
to offset the cost of exempting private equity investors from
the fifteen-percent corporate minimum tax. The cap on active
pass-through less deductions is bad policy at any time, but
it is particularly harmful when the economy is weak and an
increasing number of businesses are suffering losses. The
timing of this amendment's adoption could not have been
worse.
The Inflation Reduction Act would fail to reduce price
pressures even as it raises the cost of the tax code to small
and family-owned businesses at a time of economic weakness.
We ask that you reject the IRA's Main Street tax hike when it
is considered by the full House.
Sincerely,
AAHOA; AICC, The Independent Packaging Association; Air
Conditioning Contractors of America; American Building
Materials Alliance (ABMA); American Hotel and Lodging
Association; American Pipeline Contractors Association;
American Supply Association; Associated Builders and
Contractors; Associated Equipment Distributors; Associated
General Contractors of America; Brick Industry Association;
Ceramic Tile Distributors Association; Construction Industry
Round Table; Convenience Distribution Association;
Distribution Contractors Association; Education Market
Association; Family Business Coalition; Financial Executives
International (FEI); Foodservice Equipment Distributors
Association.
Forest Resources Association; Heating, Air-conditioning, &
Refrigeration Distributors International; Illinois Farm
Bureau; Independent Bakers Association; Independent
Electrical Contractors; Independent Insurance Agents &
Brokers of America; Independent Office Products & Furniture
Dealers Association; International Association of Plastics
Distribution (IAPD); International Foodservice Distributors
Association; International Housewares Association; Main
Street Employers Coalition; Manufactured Housing Institute;
Material Handling Equipment Distributors Association; Metals
Service Center Institute; National Association of Electrical
Distributors; National Association of Home Builders; National
Association of Professional Insurance Agents; National
Association of Sporting Goods Wholesalers; National
Association of Wholesaler-Distributors.
National Cattlemen's Beef Association; National Community
Pharmacists Association; National Federation of Independent
Business (NHB); National Grocers Association; National
Independent Automobile Dealers Association (NIADA); National
Lumber & Building Material Dealers Association; National
Marine Distributors Association; National Onion Association;
National Restaurant Association; National Roofing Contractors
Association; National Stone Sand and Gravel Association;
National Wooden Pallet & Container Association; Nebraska
Cattlemen; North American Association of Food Equipment
Manufacturers (NAFEM); North American Equipment Dealers
Association (NAEDA); Oregon Cattlemen's Association; Outdoor
Power Equipment and Engine Service Association; Plumbing-
Heating-Cooling Contractors--National Association; Power and
Communication Contractors Association.
Reserve Organization of America (ROA); Retail Bakers of
America; S Corporation Association; Small Business &
Entrepreneurship Council; Society of Collision Repair
Specialists (SCRS); Spray Polyurethane Foam Alliance;
Subchapter S Bank Association; Textile Care Allied Trades
Association; The Hardwood Federation; Tile Roofing Industry
Alliance; Truck Renting and Leasing Association; WASDA--Water
and Sewer Distributors of America; Western States Roofing
Contractors Association; Wisconsin Grocers Association;
Wisconsin Small Businesses United; Wyoming Farm Bureau
Federation.
Madam Speaker, a year ago, we met to consider another disastrous version of this bill. Since then, American families and Main Street businesses have been facing and continue to face historic inflation and, now, a recession.
This bill is a hoax on the American people. Americans who are suffering the most in President Biden's cruel economy will soon know this firsthand. They will know it because inflation will get worse, according to the Penn Wharton School of Business analysis.
Parents sitting up at night will notice higher taxes, fewer jobs, and lower wages as they pay for the vast majority of any new revenue collected under this bill, according to Congress' own nonpartisan scorekeeper.
A middle-income single mom with two kids who runs her own business will know it when she comes home from Walmart and finds a letter from the IRS telling her she is under audit.
Seniors and loved ones with life-threatening illnesses will arrive at the pharmacy counter and break into a sweat when they see they cannot afford their medicine.
Families with loved ones newly diagnosed with Alzheimer's, or cancer, or ALS, and desperately seeking treatment will wonder whether the cure for their disease will ever come.
The wealthiest and the biggest foreign-owned corporations will do just
fine. They are getting hundreds of billions of dollars of government handouts under this bill. After all, they get the government checks paid for by the middle-class taxpayers who are getting squeezed.
This is a sad day for struggling American families and Main Street businesses. This economy is cruel enough, but by voting to turn this hoax into law, Congress is inflicting one more act of cruelty.
Madam Speaker, I urge opposition to this bill, and I yield back the balance of my time.
