Thanks to competitive tax policy, smart regulations and a well-educated workforce, Texas has become a hot spot for pharmaceutical investment.
Today, the drug industry employs more than 36,000 Texas workers.
However, the jobs supported by our state’s drug businesses are in jeopardy. Federal officials have proposed major changes to Medicare that ultimately would stifle drug innovation.
If enacted, these “reforms” will drive away investment in local drug research and the jobs that go with it.
Specifically, the Centers for Medicare and Medicaid Services has proposed cutting reimbursements provided by Medicare Part B, which covers drug treatments like chemotherapy that have to be administered under medical supervision.
Doctors provide the drugs directly and then bill Part B for reimbursement to cover both the product price and administrative costs.
In 2013, Part B reimbursements were slashed as part of the across-the-board budget cuts known as sequestration. As a result, many doctors have stopped participating in the program because their expenses are greater than the reimbursements.
Ratcheting down Part B payments even further would make this problem worse. More doctors would flee, and sick Texans would have an even harder time finding someone to treat them.
That’s terrible not just for patients but for the Texas economy.
Part B patients who can’t find effective treatment will only get sicker. In failing health, some may be forced to quit their jobs outright.
That could cost the state millions of dollars in lost productivity, not to mention the devastating impact for Texas families facing these circumstances.
Plus, if doctors’ demand for medicines covered under Medicare Part B declines, drug companies will have less incentive to pour money into researching potential new treatments.
Better treatments could save lives and boost the economy by keeping workers healthy.
Pharmaceutical research is an extraordinarily risky business. Bringing a new drug to market costs, on average, more than $2.5 billion.
This industry can flourish only if innovators recover their investments to develop new products.
Instead of recognizing that reality and shelving the proposed Part B changes, federal officials plan to double down on radical Medicare changes by tampering with Part D, the Medicare program that covers prescriptions drugs.
Part D currently follows a market-based model in which private insurers vigorously bargain with drug companies to provide patients with quality drugs at the lowest possible prices.
If federal authorities trample this free market approach, they’ll likely force drug companies to offer such steep discounts that the firms wouldn’t recover their development costs.
The drug industry is a cornerstone of the Texas economy. Tens of thousands of Texans depend on this sector for a paycheck. And countless patients stay healthy and contribute to the economy thanks to the medicines created in Texas labs.
Tony Bennett is the president of the Texas Association of Manufacturers, which represents over 500 companies from every manufacturing sector.