“Transparency” Proposals Would Stifle Innovation

Recent proposals that would require manufacturers in the pharmaceutical industry to disclose sensitive and proprietary business information, such as pricing on specific products, marketing costs, planned research investments, anticipated profits and manufacturing production costs, would set a dangerous precedent that will deliver chilling impacts to our global competitiveness and further dampen prospects for more robust economic growth.

President Obama introduced the idea in his 2017 budget proposal, and the issue is occasionally amplified in the Halls of Congress and on the campaign trail.

Such a move would certainly be sweeping and dramatic, directly impacting the innovators who are leading research and developmentpharmaceutical, bio-pharmaceutical, bio-tech and related industries. Even thought these proposalssome at the state and others at the federal leveltarget one sector, manufacturers across all sectors don’t like the idea of hampering innovation.

In the most recent NAM outlook survey, manufacturers were asked about measures in state legislatures across the country aimed at requiring manufacturers to turn over highly sensitive operational information, such as production and marketing and research costs that support new and innovative product development. Survey findings include the following (respondents were able to check more than one response):

  • These measures threaten manufacturing competitiveness. More than 83 percent of respondents would consider these actions a threat to their competitiveness.
  • These measures threaten investment. More importantly, 46.7 percent felt that these measures would force them to curtail investments in research and development (R&D) of now-proprietary technologies and products.

And as John Lechleiter, chairman, president and CEO of Eli Lilly and Company, detailed in a recent Wall Street Journal op-ed, “Forcing Lilly, or other companies, to disclose product-by-product and payer-by-payer discounts would be an unprecedented affront to free-market competition.” Lechleiter goes on to note that Lilly, like other public companies, must already disclose R&D spending in audited financial reports each year. In fact, in 2015 alone, Lilly spent $4.8 billion on R&D, “part of the $50 billion invested in R&D each year by the members of our industry association alone. That’s more than 20 percent of all R&D spending by all U.S. businesses. Seen against that staggering total, the proposal to mandate the nearly impossible task of assembling drug-by-drug R&D-spending figures misses the whole point.”

Innovation is the lifeblood of the U.S. manufacturing industry. No manufacturer in any industry should ever be forced to hand over the proprietary information that makes a company and its products successful in the marketplace. For pharmaceutical manufacturers, enacting more stringent disclosure requirements would impede the process of bringing lifesaving medicines to market. It would kill competition and stifle innovation and even fails to adequately contain health care costs.

To secure manufacturing competitiveness, we must create a policy environment designed to attract and retain investment and encourage innovation with strong protections of intellectual property. The NAM opposes efforts that would force manufacturers of medicines to heed these new government-driven demands that are contrary to basic free market principles.

Robyn Boerstling

Robyn Boerstling is the Vice President of Infrastructure, Innovation and Human Resources Policy at the National Association of Manufacturers.

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