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Medicare Negotiation & Competitive Licensing Act

  1. Purpose of Bill: H.R. 1046, the Medicare Negotiation and Competitive Licensing Act, allows the Secretary of Health and Human Services (HHS) to directly negotiate prescription drug prices directly with pharmaceutical companies under part D of the Medicare program. If a drug manufacturer refuses to bargain in good faith and a negotiation fails, HHS will issue a competitive license to allow other manufacturers to produce generic versions of the drug. The generic competitors will pay a fair royalty fee to the original manufacturer for the use of their patent and exclusivity rights. The original manufacturer will have the option to seek a higher royalty fee in federal court. While a generic is awaiting FDA approval, the original manufacturer will be subject to a price cap equivalent to the average price in other countries with similar economies to the U.S.
Click Here To See Full Text of Bill

2. Why does AMHP Support H.R. 1046? The American Muslim Health Professionals (AMHP) supports H.R. 1046 because we believe that the Health and Human Services (HHS) agency must have negotiating authority and adequate bargaining power on the absurdly increase of prescription drug prices. Millions of Americans under Medicare who depend on affordable prescription drugs are unable to obtain their medications due to pharmaceutical companies who refuse to bargain fair drug prices in good faith. Therefore, the HHS must step in to negotiate prices to ensure that every American under Medicare is able to afford her or his prescription medication at a reasonable cost.

3. Current Status of Bill: “Referred to the Committee on Energy and Commerce, and in addition to the Committee on Ways and Means, for a period to be subsequently determined by the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the committee concerned,” according to the U.S. Congress website

4. Pros & Cons of Bill: The main argument advanced by advocates for granting the federal government the power to negotiate is that lower prices for prescription drugs could be obtained and passed on to Medicare beneficiaries. By using the market power of roughly 41 million Medicare beneficiaries, proponents argue that the pharmaceutical companies would provide deep discounts to the federal government in order to prevent the loss of a significant portion of their market.
Critics, on the other hand, assert that Medicare negotiation means government price-setting and that the competitive licensing is an unconstitutional taking of property. However, one must recognize that other payers in the U.S. and countries throughout the world leverage their bulk purchasing power to negotiate reasonable prices. Price-setting is altogether a different mechanism. Licensing is also used regularly by the federal government and has been upheld repeatedly by the courts as constitutional and not a taking.

Another argument against the bill is that the government would use its collective power to drive down prices to the extent that research and development would suffer, resulting in less innovation and fewer new products being brought to market. However, the bill actually protects and better aligns incentives for innovation. H.R. 1046 includes a provision that ensures they receive reasonable compensation in the event that a license is issued for one of their drugs, meaning their investment won’t be completely lost—just their ability to exploit it to extract maximum profit from the patients who take their medicine.

5. How can you participate within the issues of medicare negotiation and/or drug prices? Contact your U.S. Representative before July 26 and article the importance of drug pricing and a comprehensive and effective negotiation such as the Medicare Negotiation & Competitive Licensing Act by cosponsoring H.R. 1046. If your U.S. Representative is already co-sponsoring the bill, thank her/him and then encourage her/him to call for a vote on this bill.

Lujain Al-Khawi
Health Policy & Advocacy Intern




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