The document provides an overview of the Senate version of the AHCA healthcare bill. It discusses how the bill would decrease costs for insurers and the government by reducing premium credits, but cause premiums to rise for those with pre-existing conditions or who are older. The bill is likely to cause medical costs and premiums to increase substantially and become too expensive for many individuals. Key factors that could cause the AHCA to fail include rising medical costs, premium increases, and the bill becoming too expensive for individuals.

1. I need to get up to date on
the Healthcare Bill quickly!
A QUICK OVERVIEW OF THE SENATE VERSION OF THE AHCA
Why are my constituents
so upset
about the healthcare
bill?
I wish I didn’t
look like
Paul Ryan.
with additional facts and footnotes at your fingertips 1
Don’t have time to become
a medical expert?
We understand. Use our
handy guide to look up
Information and suggestions.

2. AHCA is like a 3-headed monster: Tax Bill, Healthcare Plan, and Medicaid.
2

3. Cost to insurers
goes down due to
pre-existing
conditions
Cost to the government goes
down because premium
credits decrease
PREMIUMS
will go up
For voters without a pre-existing
condition because healthy
people will no longer
be required to buy
Insurance.
Premiums for those
with pre-existing
conditions will
go up
COSTS
will go down
There’s something for everyone in this bill, except the voters.
3
WHAT WOULD MAKE THE AHCA FAIL?
Too many insurance companies dropping out………………………Less Likely
Too many expenses to the government………………………………....Less Likely
Medical costs will go up and cause premiums to rise…………………….....Extremely Likely
Too expensive for individuals………………………..……..………………..…..….Extremely Likely

4. 4
If
This PowerPoint is going to talk about some of those items and more.
• The Safe and Affordable Drugs from Canada Act with a few other
countries added.1
• Enact external reference pricing.
• Lower drug prices by the FDA getting caught up on their backlog of
generic drug applications.
• The Preserve Access to Affordable Generics Act to increase competition
and stop Pay for Delay.2
If Congress doesn’t do something to lessen the drastic increases in prescription costs, you will
end up trying to fix Trumpcare during the next five years. See IMS forecast at the back.

5. I know many voters who want LOWER premiums, but I only know 1
person who wants repeal of the NIIT. To help keep insurance
affordable, you could keep the NIIT and apply the tax money to
increase subsidies. Or as a compromise, raise the NIIT threshold
amount a little.
Less Increases to Premiums Stop Spiraling Drug Costs
5

6. HEALTHCARE PROBLEMS ARE LIKE DOMINOES
When saving money now leads to larger expenses later.
Eliminating the Individual Mandate leads to more uninsured individuals going untreated, which also costs the money.
Example 1. They could wait until they end up in Emergency Rooms to get free treatment under EMTALA. EMTALA treatment in hospitals
result in higher indirect costs which are passed along to other patients. Higher hospital bills lead to higher insurance premiums which burdens
everyone with insurance, not just the patient.
Example 2: They could go without their blood pressure medicine, have a stroke and end up on SSI disability.
Example 3: An uninsured MS patient may skip medication because of insurance. Since MS is a progressive disease, lack of treatment to
disability earlier. It cost the government more when they go on SSI disability and Medicare.
Result: Insured taxpayers and government subsidies pay the costs of uninsured patients.
Increasing premiums for voters over age 50 leads to more uninsured individuals over 50.
Some will go the Emergency Rooms for free care or others, being left untreated, may develop in
a serious condition leading them to go on SSI Disability or early Medicare and Social Security.
Result: Government costs go higher.
The Emergency Medical Treatment and Labor Act (EMTALA) is a federal law that
requires anyone coming to an emergency department to be stabilized and treated,
regardless of their insurance status or ability to pay, but since its enactment in 1986 has
remained an unfunded mandate
7

7. 5 MILLION VOTERS WANT YOU TO CHANGE THE MAXIMUM PREMIUMS
FOR AGE 50+ VOTERS BACK TO 3 TIMES
the younger rate, instead of the 5 times in the current AHCA. Higher premiums for age 50! rewards employers who commit age
discrimination over honest employers. Age 50+ voters may use EMTALA for ER or go on Medicare early or go on SSI Disability.
Result: Saving money now, will cost the government big later.
WANT A BILL WITH A HEART?
Changing the maximum limit on
premiums back to 3 times will reduce
the number uninsured voters over
the age of 50 in the
CBO estimate.
.
12,700,000 x .31 = 3,937,000 3,937,000 x .26 = 1, 023, 620=937,000
ACA enrollment Percent over 50 Estimated ACA enrollees over age 50 Percent on statins Estimated enrollees on statins
ESTIMATED SAVINGS between $65,757,349 (calculated using brands) to $40,402,281 (calculated based on generic statins)
8
Instead of incurring the wrath of 5 million voters, why not
reduce costs of prescriptions? The savings by importing
statins from Canada and the UK would be:

8. In the beginning….
Under the ACA, the corporate tax deduction for CEOs was limited, but insurance companies continued to give large
pay increases to the chief officers because the pay increases enabled companies to avoid rebates requirement. The
raises still increased the company’s non-claim costs used in the rebate calculation. So, health insurance companies
continued to give their chief officers huge raises, and use it to justify increasing health insurance premiums.
Can you trust insurance companies to pass along cost savings from AHCA to
reduce premiums or would they give themselves another raise?
9

9. STOP!
Voters want you to
DECREASE
premium costs,
not increase them!
Why do The AHCA replacement bills do the opposite of what
voters WANT and the President promised?
Recommended Reading: Comments by Thomas Barthold, Chief of Staff of the Joint Committee of
Taxation http://news.cchgroup.com/2017/03/09/ways-means-holds-markup-aca-repeal-replacement-
legislation/
10

10. No, BI
Does Section 204 and 205 really mean that
insurance company CEO’s are limited to
giving themselves small raises like USA
Today said???
No, it means I can give
myself a HUGE raise if
my lobbyists can talk
the State Insurance
Commissioner into it!
In a world where drug
companies had purer motives,
this would have a percent limit
on how much company officers
can give themselves in one year.
11

11. Prescription Drug Costs Around The Globe www.beckerhospitalreview.com
The U.S. really does have the highest drug prices in the world!
(Canada is the second highest)
12

12. Value-based price is a pricing strategy which sets prices primarily, but not exclusively, according to the perceived value of a
product or service to the customer rather than according to the cost of the product or historical prices. These models are
not readily transparent. Instead of cost, they use factors such as dollars per life year, toxicity discount, novelty multiplier, cost of
development, rarity multiplier, and population burden of disease. For an example: https://drugpricinglab.org/
Value pricing is somewhat unique to the US because other countries examine the costs before agreeing to prices.
For Example:
High School students in Australia make
Daraprim for $20 USD. Turing
Pharmaceuticals sells the same amount for
$35,000 USD.
Full Article at http://www.abc.net.au/news/2016-11-30/daraprim-nsw-
students-create-drug-martin-shkreli-sold/8078892
VALUE PRICING
Many pharma companies no longer value products based on
cost. Instead, they use value pricing models.
13

13. want to buy prescription drugs from Canada
(and 50% of the women wanted to meet Justin Trudeau…. Just kidding)
The virtue of permitting importation from Canada and the UK is that it provides a mechanism to lower drug costs
without having to pass a price regulation bill. You can give this to voters without cost to the government.
14

14. Reduce Prescription Costs By Increasing Competition
Merge and edit the S.92-Safe and Affordable Drugs from Canada Act3 and the S.469-Affordable and Safe Prescription Drug Importation Act4
to include other countries
+ Must include more countries than Canada1
+ Include only other countries detailed clinical test data such as the UK, Australia.2
+ Require appropriate labeling in English
+ Prohibit opioids, pseudoephedrine and any controlled substance (as defined in section 102 of the Controlled Substances Act)
+ The CDC estimates between 4 million and 5 million US patients already buy prescriptions in Canada.1
Footnotes:
1. It must include more countries than Canada because, in the past, pharma companies have retaliated against Canada for drugs to the US by deliberately creating drug shortages and raising prices.
2. Mexico, China and India are deliberately left off this list because of news articles on poor quality. This list might be able to include certain countries in the EU. Ireland, Germany & Switzerland used
to be known for effective quality measures; but news reports on drugs from Eastern Europe have been discouraging. Maybe the FDA could give advice about including the EU? Also, you may want
to consider Japan and Israel.
3. Senator John McCain’s bill previously in committee.
4. Senator Bernie Sanders’ bill previously in committee.
The Senate might also want to consider allowing Community Health Centers and FQHCs to buy imported prescriptions as FQHCs are often short of funds,
This is a great way to help your voters without increasing cost to the federal government.
Savings could result in a cost savings between $65 Million to $42 Million
15

15. What would happen if Americans could buy their prescriptions from Canada or the UK?
$330
Savings per box
on Epi-Pen!
Look how
much higher
US generic
prices are!
Relapsing MS Leukemia
Cost savings includes a broad range of prescriptions. Sometimes, voters may get upset when their elected officials
vote against drugs from Canada because it literally cost them thousands of dollars every year. Moreover, the higher
prices of US biologics is allowing US generic prices to. soar.
16

16. CORPORATE INVERSIONS ENABLE PHARMACEUTICAL COMPANIES
TO PAY A LOWER TAX TO OTHER COUNTRIES
ON PROFITS FROM CHARGING U.S. CUSTOMERS THE HIGHEST PRICES
17

17. Prices in Germany, Denmark, the United Kingdom15 and the Netherlands are first considered. France, Austria and
Italy can be considered as subsidiary countries, and other countries may be included in the comparison.
One Solution: Use External Reference Prices like they do in Europe
FOOTNOTES:
1.Canada defines their highest price as the median price from US, UK, France,
Germany, Switzerland, Italy and Sweden or highest priced Canadian drug in the same
class. Proposed change to replace US and Switzerland prices in price model are
pending. Adjustments made for purity and effectiveness. Because they do not have
universal coverage for prescriptions, it is a multi-payer system.
2. Ireland should be included because it is the primary destiny for our former
pharmaceutical inversions. Price is limited to average price of a basket of nine
reference price countries – Austria, Belgium, Denmark, Finland, France, Germany,
Netherlands, Spain and the UK. For new drugs, pricing is reviewed after 6 months.
Afterward, prices are reviewed every 2 years.
3. UK applies a profit control of 29.4% after allowances for R&D. Since cost allocation
among multiple products can be a gray area, prices are sometimes negotiation with
NHS.
4. Switzerland is a multi-payer system. They set a maximum price based on average
prices in Germany, Denmark, the UK and the Netherlands. France, Austria and
Germany and other countries may be added. They require disclosure of an EU target
price.
5. Germany allows the company to set their price for new drugs for the first 6 months
after approval. During first 6 months, the government evaluates the drug for benefits
and quality and uses the factors and reference prices from other countries and internal
price references to drugs in the same class using a complex pricing model. Because
the model is not working, drug prices are frozen and price reviews suspended. Drug
prices are currently frozen until the end of 2017.
6. Netherlands uses external reference prices, but they are a single payer system.
The reference price is the average wholesale price of similar drugs in Belgium, France,
Germany and the UK. Prices are reviewed every six months. The Dutch government
can directly negotiate prices with pharmaceutical companies.
FOR MORE INFORMATION SEE COUNTRY PROFILES AT:
http://international.commonwealthfund.org/features/cost_containment/
Some day, when the American public finally gets angry enough, all drugs
in the US will be priced using external reference prices like this,
What would a US
model look like?
US UK FRA GER SWI ITAL SWE
INSERT: CANADA’S EXTERNAL REFERENCE PRICES:
Limit prices for corporate inversion’s products to non-US prices by capping their
maximum price to external reference prices.
18

18. G
PATENTED
ENERICS
ECONOMICS 101: The Drug Market is Essentially 2 Types of Markets
Patented Drugs are a monopoly for their early years after approval, more months
for orphan drugs and there are several ways to extend patents. Economists tell us
that a monopoly lack free market competition to drive prices.
Generic Drugs experience more competition which drives prices more like a free
market. Some types of drugs have very few competitors, these are oligopies.
Because of the monopoly on patented drugs, all developed countries have
some price controls except for the US and India.
19

19. Ther
Many Americans do not know that the FDA has very little legal authority
to stop outrageous price increases.
In the UK, the government’s price regulatory board can
take action for excessive price increases including
fines.
In the US, no action can be taken solely because of a price
increase. There needs to be a different violation, such as an
anti-trust violation.
20

20. PATENTS EXPIRING IN 2017
2018 looks like it is going to be a good year for generic approvals because
popular drugs including Cialis, Viagra & Tami-flu will be going off-patent.
However, there are several ways for companies to stop their drug fromm
going off-patent.
The FDA has said they would get more caught up on their backlog of almost
4,000 generic drugs waiting for approval.
At worst, the generic market is like an oligoarchy in contrast to patented drugs
which is a monopoly. The prices in the generic markets should be more
competitive.
Recently, there is an alarming activity in the prices on generic drugs.
Prescriptions whose patents expired many years ago, such as insulin, Dilantin
and Daraprim are increasing prices despite their R&D costs have been
recovered years ago.
There has been huge price increases and hints of anti-trust violations. Four
examples of price gouging in the generic market are in “Sudden Price Spikes
in Off-Patent Drugs: The Monopoly Business Model That Harms Patients,
Taxpayers and The US Healthcare System” by the Special Committed on
Aging, US Senate, December 2016 at:
https://www.collins.senate.gov/sites/default/files/DP%20Report.pdf
21

21. ANTI-COMPETITIVE ACTIVITIES:
DRUG FLIPPING
A private equity firm buys licensing rights to a target drug from a pharmaceutical company. The drug is usually an older generic with little competition. Then, the
private equity firm sells those licensing rights to a different drug company. The new drug company raised the price. This works especially well if they new drug
company either already has or buys the licensing rights to the competing drug.
Recently, the FTC took action against Mallinckrodt PLC. It was NOT
because they raised the price of Acthar by 85,000%. It was based
on their purchase of the license of a competing drug.
22

22. RISING DILANTIN GENERIC PRICES
ANTI-COMPETITIVE ACTIVITIES
Price Fixing or Lock-Step Pricing
Two branded competitor raised prices at the same time. Branded and generic competitors raised prices at the same time.
23

23. ANTI-COMPETITIVE ACTIVITIES
Pay for Delay
24
WHAT IS PAY FOR DELAY?
It is the payment by a pharmaceutical company to competitors to not copy a certain medication. The results are more profits for big pharma and
therefore an extension of their monopoly on pricing. The FTC says pay for delay costs taxpayers, insurance companies and consumers almost $4
billion per year.
This would save money for
individuals and Medicare cost
to the government too.

24. 25
More evidence the U.S. generic market has not functioned correctly.
The number of
pay for delay
cases grew.

25. 26
STATE ATTORNEY GENERALS ARE SUING
WHEN THE FEDERAL GOVERNMENT DOES NOT.
When states do the suing, does the
federal government still get part of the
money for Medicare’s share?

26. Americans file class action suits
but the British continue paying
the same prices.
Sometimes.
27

27. A discussion of rising health costs at Aspen Spotlight Health Festival in June suggested that the government should
examine price increases on older generic drugs for chronic conditions, which recovered the R & D costs long ago.
Following their advice, the FDA would look at those life-time drugs, which people take for many years such as insulin and Dilantin (phenytoin). For
example, Dilantin was first approved by the FDA for epilepsy in 1953. In the 64 years since, it has recovered R&D costs probably several times
over. Bottpm Right: The price of an anti-epilepsy drug increased 2,600% in the UK in 2016.
Many Americans view the FDA like this: The UK fined Pfizer or unfair pricing. No action was taken
in the US.
28

28. GEOGRAPHIC DISTRIBUTION OF EPILEPSY
LITTLE KNOWN FACTS
Epilepsy is diagnosed in 125,000 Americans each year. 1 in
26 people develop epilepsy during their lifetime. With so
many patients, a big price increase quickly turns out the be a
big expense to the government.
If 12,700,000 were insured on AHCA:
12,700,000  26 = 488,466 patients
If prices were reduced by $10 per month, the annual
savings would be $58,615,920.
If your constituents are in one of these red or dark red states,
price increases in anti-seizure medicine is important to you.
EXAMPLE: Dilantin, Phenytoin Sodium (Generic) & Other Anti-Convulsants
Prices for these medicines keep going up, but R&D costs were recovered decades ago. Lock step pricing between brand and
generic is shown on slide 23.
Researchers are yet to determine how much heredity and traumatic brain injury causes epilepsy. There are different types of epilepsy and
several genes involved. Childhood absence epilepsy and Dravet Syndrome are genetic. Children born to women with epilepsy are more
likely to have epilepsy than children of fathers with epilepsy. If epilepsy were entirely due to traumatic brain injury, the states with the highest
rate of epilepsy would be the Stroke Belt; but it does not match. Research has proven that anticonvulsants used by pregnant women are
linked to a higher rate of autism in the offspring.
29

29. Diabetes discriminates by race. Type 1 always has the HLA-DR3 and HLA-DR4 haplotypes. Type 2 stems from metabolic issues and has a
strong link to family history. The highest rate is for the Native Americans and their descendants, as the gene may pass through many generations.
The next highest are non-Hispanic blacks and Hispanics. The increase in insulin prices by 508% effected minorities more, and if they skip
treatment, it increases their death rate. Some people feel enabling a higher death of minorities is like genocide.
EXAMPLE: Insulin and other diabetes medication
30

30. 31
LOCKSTEP PRICING AND COLLUSION KEEP DIABETES MEDICINE PRICES
HIGH

31. 32
The Pharmaceutical Research and Manufacturing Association has launched an ad campaign advocating legislation
requiring PMD’s to pass along a prorata share of rebates and discounts to the customers. Analysis by Amundsen
Consulting found more than half of commercially insured patients’ out-of-pocket spending for brand medicines is based on
the full list price. Insurers should share more of these rebates with patients. Providing access to discounted prices at the
point-of-sale could dramatically lower patients’ out-of-pocket costs. SOURCE: http://www.phrma.org/discounts

32. PHARMA FORECASTS TO 2021
Hint: The price of pharmaceuticals will rise.
33

33. 34
OUTLOOK TO 2021
A few observations taken from IMS Quintile

34. 35
SPENDING ON SPECIALTY AND BIOLOGIC PRESCRIPTIONS CONTINUES TO GROW
Price per prescription are usually higher; in part, because these drugs are targeted to a smaller patient base. For example, Harvoni. Solaris, etc.

35. 36
There are some very exciting prescription in
the pipeline for the next 5 years!
More cystic fibrosis treatments are already in the FDA pipeline.
Researchers hope to introduce gene therapy for Type 1 diabetes in
the next 5 years. MS has 4 drugs in Phase 3 and 4 drugs in the
licensing phase.
Diabetes
Cystic
Fibrosis

36. 37
About Me
I am not hired by drug companies.
I am not hired by insurance companies.
I am not connected with any medical lobby group.
I am not a doctor.
I get sick sometimes.
I am a CPA who work on taxes and management consulting. As I was going through the tax provisions
of the AHCA, and trying to explain them to my tax clients, I was alarmed at how hard this bill is to
explain to real people.
So, I decided to make this easier for you by doing the research for you.
Merry Christmas because hopefully this bill will be done by then,
Lucia Perri, CPA, MBA