- The Washington Times - Wednesday, December 14, 2005

The much-derided “bridge to nowhere” in Alaska was blown up before Thanksgiving. It had become, as the Wall Street Journal observed, “the poster child for Republican fiscal extravagance and the object of justified ridicule across the political spectrum.” The bridge to nowhere is, however, a mere footpath compared to Sen. Chuck Grassley’s highway of hubris: a back-alley abrogation of existing law that will protect a handful of drug companies from competition at a cost to consumers of about $5 billion over two years.

Mr. Grassley has always used a combination of whistle-blowing hearings and dead-of-night amendments to make his mark by himself. But now, Mr. Grassley’s arrogance and impunity in shoving this scam down the throats of the American people shows that he’s one reason why rank-and-file Republicans believe their party has veered from both principles and probity in their governance of the nation.

Mr. Grassley’s particular peeve is that brand drug companies under a law designed to promote generic drug competition (the Hatch-Waxman Act) are doing just that — pricing their products to compete against a generic product once the brand’s patent expires and a generic enters the market. Brand products at generic prices are commonly called “authorized generics.” The Food and Drug Administration, Federal Trade Commission and a Federal Appeals Court have made it clear that Hatch-Waxman allows for this competition. As the court has noted, nothing prevents a brand company from marketing its product as a generic. Indeed, doing so is consistent with the objective of the Hatch-Waxman Act (the Drug Price Competition and Patent Term Restoration Act).

To prohibit a brand company from marketing its product as a generic drug would require a change in statute. Mr. Grassley asked the FTC to re-examine the impact of authorized generics on competition but apparently isn’t interested in waiting for its report or relying on hearings to further vet the issue in the committees that have actual jurisdiction over generic drugs. His end run around Hatch-Waxman is an extended index finger to the agencies and courts that have ruled on the measure. It forces brand firms that launch or license generic versions of brand products to sell any remaining brand products on the market at the generic price to Medicaid and eventually Medicare. Historically, that’s about 15 percent of a product’s sales the first year or so after a generic hits the market.

So, in effect, Mr. Grassley is slapping a price control on innovative companies as a penalty for proceeding with generic competition. He and his health-care policy director Mark Hayes have stated that they hope the measure will discourage generic introductions from brand companies. The Senate Finance Committee, which Mr. Grassley chairs, does not have jurisdiction over Hatch-Waxman. But that little detail hasn’t deterred the Grassley-generics industry alliance.

If it does, their victory of arrogance will come at the expense of taxpayers and consumers. Over the next two and a half years about $60 billion in brand drugs will become generic; $30 billion of that will be sold without competition for 180 days if Mr. Grassley gets his way. And many other generic drugs that are difficult to make or have limited supplies of raw materials will continue to not have any Authorized Generic competitor.

Historical pricing data shows that brand companies launch their generics at a 50 percent discount off retail price compared to a 30 percent discount experienced when a generic drug has no competition. If Mr. Grassley gets to override existing law and judicial precedent, consumers and taxpayers over the next two years would see about $8 billion in savings instead of $13 billion in savings. The bridge to nowhere cost about $250 million. With Mr. Grassley’s power grab, at a cost to consumers and taxpayers of $5 billion, 25 bridges to nowhere could be built. The $5 billion will line the pockets of a handful of generics companies.

This hijacking of Hatch-Waxman is unfortunately not as clear a target to deride as the bridge to Gravina Island. Flouting both congressional intent and the judgment of a federal appeals court, which would kill competition and cost consumers billions, cannot be easily conveyed in a sound bite. But the abuse of power is more brazen.

Abraham Lincoln observed, “Nearly all men can stand adversity, but if you want to test a man’s character, give him power.” Voting down the Grassley proposal would be a true test of character for Republicans. It would be a vote for the rule of law, a rejection of political arrogance and a rebuke to the Republican Party’s disregard for liberty and free markets in recent months.

At stake is the integrity of the legislative process, the respect for our republican form of government and the reputation of the party.

Robert Goldberg is director of the Manhattan Institute’s Center for Medical Progress.

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