Coalition Letter Opposing Binding Arbitration

The Honorable Mitch McConnell Majority Leader

The Honorable Charles Schumer Minority Leader

The Honorable Nancy Pelosi Speaker of the House

The Honorable Kevin McCarthy Minority Leader

Dear Leader McConnell, Minority Leader Schumer, Speaker Pelosi and Minority Leader McCarthy,

The undersigned organizations write in strong opposition to binding arbitration as a means to address rising medical and drug costs because it will unnecessarily increase complexity and spending, while simultaneously delaying payment for drugs that could create access issues.

In lieu of allowing HHS to interfere in private price negotiations, some have suggested third-party binding arbitration as a way to lower drug prices. These proposals would allow a government-appointed third party to dictate what price Medicare will pay for pharmaceuticals. Such authority threatens the right of patients and doctors to choose the right treatment for their health. While the details of a binding arbitration proposal are likely to give rise to additional concerns, overarching problems with this approach include:

Price Controls

Binding arbitration in the context of drug pricing is a de facto price control because it allows arbitrators to set the price of drugs following a closed-door evaluation wherein the arbitrator holds sole decision-making authority. It is in no way a middle of the road approach, but a way to invest great power to set prices for millions of seniors and the disabled in one or a few people. Ultimately, this could leave patients in dire need of new medications without the drug therapies that could save and improve their lives.

Limited Choice

Other countries that have adopted binding arbitration for drug prices have seen patient choice decrease as drugs withdraw from the market. This sort of government interference not only breaks with longstanding policy principles in the United States that fiercely champion choice and competition, it also puts a wedge in the provider-patient relationship that complicates care.

Arbitrator Bias

Arbitrator selection criteria is typically a critical element of the arbitration process. It is designed to provide assurance to the parties that the decisionmaker does not have inherent bias that could jeopardize fairness. Binding arbitration as proposed in the context of drug pricing negotiations, lacks any clarity about:

• How the arbitrator will be selected;

• From what pool arbitrators may be selected;

• The weight of the government versus the private parties’ preferences in arbitrator
selection; and

• What required qualifications the arbitrator must have (including the arbitrator’s
level of expertise and familiarity with drug pricing).