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Government Drops ‘Reasonable Pricing’ Rule On Drugs

Wed., April 12, 1995

The government will no longer make pharmaceutical companies agree to set “reasonable” prices for new drugs they develop from research agreements with the National Institutes of Health.

The NIH announced the elimination of the “reasonable pricing” clause Tuesday, saying it didn’t protect consumers but did deter the industry from collaborating with federal scientists.

“Eliminating the clause will promote research that can enhance the health of the American people,” NIH Director Harold Varmus said.

But a lawmaker said the move could hurt consumers, and pledged to battle any price gouging of drugs that result from NIH collaborations.

“Certainly if drug and device companies see the government is asleep and try to take advantage of consumers, Congress can step back in,” warned Rep. Ron Wyden, D-Ore., who had urged the NIH to strengthen the pricing clause.

The drug industry spent last year lobbying hard for the move.

But consumer advocates argued that Americans pay twice for many drugs: first with taxes and then at the pharmacy.


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