This week, the United States Air Force announced it would not proceed with developing a second engine for the F-35. The Taxpayers Protection Allian...

This week, the United States Air Force announced it would not proceed with developing a second engine for the F-35. The Taxpayers Protection Alliance (TPA) applauds the Air Force’s latest move to forego the Adaptive Engine Transition Program (AETP) and save taxpayers billions of dollars as a result. The Air Force’s decision not to pursue building a second engine for the F-35 is a huge win for all taxpayers. Air Force Secretary Frank Kendall said that funding a new engine would have come with a price tag of $6 billion, and estimates suggest it would add more than $40 billion to the lifecycle cost of the program. The F-35 program began as a multi-billion dollar program now projected to run into the trillions. Not only was the cost an important factor to consider, but the functionality of the engine was also questionable. The AETP is unadaptable to the Marines’ F-35B or the Navy’s F-35C making it unwise to move forward. TPA was proud to lead a campaign to halt the funding of the second engine
and we are pleased that lawmakers and Pentagon officials agreed.

IP is Everything and Everywhere

Each year, countless celebrities traipse down the red...or champagne hue...carpet to give memorable interviews and receive critical acclaim for their work. The Oscars wouldn’t be much of a show, though, without the millions of fans who flock to screens big and small to see films such as The Whale and Everything Everywhere All at Once. Thanks to the sway of strong intellectual property (IP) protections, actors, directors, set workers, and investors can rest assured that critical acclaim will translate to commercial success. IP is the star of the show, even as a growing chorus of lawmakers and pundits question the wisdom of copyright and trademark laws. To creators and their fawning fans, IP is everything and everywhere in the multiverse of movie magic.

An average Hollywood-caliber film has about 500 or so employees engaged in everything from acting, technical expertise to carrying duct tape to make any last-minute fixes. If movies cannot successfully reach consumers through legitimate channels, the workers can’t get paid. According to a 2015 analysis by University of Maryland and Carnegie Mellon University scholars, box-office revenues could increase by 16 percent if piracy were eliminated. Based on pre-pandemic box office figures, that would amount to a yearly windfall of $300 million, or about $700 each for the industry’s estimated 450,000 employees. Despite claims that piracy has a positive promotional effect on films, there’s little evidence to suggest that IP violations bolster the movie industry. Study authors Liye Ma, Alan L. Montgomery, and Michael D. Smith find that any positive word-of-mouth promotion via piracy amounts to less than 2 percent of box office revenues. And, with the rise of targeted, digital advertising by
production companies, even this small impact is likely to disappear altogether. Piracy is clearly a significant drain on the entertainment industry, with downstream effects including increased ticket prices for consumers and fewer entertainment jobs. Asking a handful of movie producers or a trade group such as the Motion Picture Association to go after pirates is a losing proposition because of the sheer size of the problem. Government needs to actively enforce property rights by going after the leading purveyors of privacy. The piecemeal shutting down of sites featuring bootleg content is not sufficient when black market consumers can easily shift to other websites offering bootlegs. Rather, federal authorities must identify and shut down en masse the source sites that feed copied content to illegal streaming sites.

The U.S. should also make clear that not only big Hollywood productions are protected by copyright laws. The recently formed Copyright Claims Board (CCB) is a tribunal designed to field claims totaling less than $30,000 and offers a streamlined alternative to costly litigation in court. However, nearly 70 percent of claims to date have involved pictorial, graphic, and sculptural works rather than small film productions. The CCB should make clear to fledgling movie producers that affordable legal recourse is available for copyright claims. All creators are entitled to their due, whether it is $2,000 or $20 million. Intellectual property is the “Top Gun” America has in its arsenal for continued innovation and creativity.

PBM Reform Means Drug Pricing Reform

The high cost of prescription drugs has been an issue on the minds of many Americans for years. Now, Congress is beginning to investigate a previously under-the-radar culprit behind the sky-high prices, Pharmacy benefit managers (PBMs). Essentially, PBMs are middlemen who negotiate between insurance plans and drug companies. Due to a series of perverse incentives in the current pharmaceutical ecosystem, these companies can pocket huge profits while keeping drug costs artificially high for millions of Americans. PBMs primarily serve as intermediaries between pharmaceutical companies, insurance plans, and employers who provide those plans to their employees. In theory, they are supposed to negotiate deals to create the best outcome for the parties involved and to lower costs. While PBMs may take nominal steps to “lower” costs, it is most lucrative for them when drug list prices are higher. They have a set of underhanded tactics at their disposal to pad their bottom line, while keeping drug
costs higher for employers, health plans, and – ultimately – patients.

The first way this is done is through rebates. A PBM could negotiate to purchase prescriptions from a pharmaceutical company for $500 per month, but agree to a $100 per month rebate every time a purchase comes in. So, the true cost is $400 per month. However, the PBM can – and often does – pocket a large portion of that rebate. In this instance, PBMs could keep $80 of the $100 rebate and only pass along the other $20 to employers. Employers, meanwhile, think they get a nice discount to $480 per month from $500. However, the pharmaceutical company could have just sold it for $400. The difference is that the PBM could not have pocketed a nice rebate for itself. In this way, PBMs are incentivized to keep prescription prices higher, so they have the opportunity to negotiate higher rebates. If drug costs went down, or employers paid closer to face value, PBM profits would plummet. The second way this is accomplished is through what’s called “spread pricing.” In another hypothetical scenario, a
PBM negotiates a discount for a drug with an average wholesale price (AWP) of $50 per month. In this instance, they negotiate an 80 percent discount to $10 per month. Ultimately, there is a maximum allowable cost (MAC) for pharmacies. If, for this drug, the MAC was $5, the PBMs could pocket the excess $5 for itself. However, the national average drug acquisition cost (NADAC) for this particular drug could be far lower than that, at $2 per month. Pharmacies could then pocket an extra $3 for themselves. Again, employers think that they just got an 80 percent discount and are doing well. Meanwhile, that drug really only cost $2 per month and PBMs pocketed $5 and pharmacies received $3. PBMs get contracts based on negotiating down from list prices or prices based around the AWP. However, the AWP is a largely fictitious number – much like a list price on a car. Many joke that AWP actually stands for “ain’t what’s paid.” NADAC is a more accurate number, but PBM contracts rely on this false AWP
number and both they and the pharmacies are able to generate revenue from these mythical discounts that – in actuality – leave employers and plans paying more.

As lawmakers increasingly realize this, they are working to curtail these predatory behaviors. This is especially important for government plans, like Medicare. In that instance, the plan is funded through taxpayer dollars. When PBMs rip off Medicare, it’s American taxpayers who are bearing the financial burden. Congress has many resources at its disposal. It can implement transparency measures. Short of an outright ban on rebates and spread pricing, a transparency push would make it clear what deals are going on behind the scenes to better inform employers and plans about what the actual cost is. This would also be key for oversight in Medicare to identify waste, fraud, and abuse – especially during a debt ceiling fight. Congress has a little less authority to ban these practices altogether, but can certainly do so solely within Medicare. Because Medicare is a taxpayer-funded plan, government can – and should –address the ways PBMs are squeezing hard-earned taxpayer dollars into their own
coffers. Prescriptions account for 20 percent of healthcare spending in the United States. This is no small issue. As the hypotheticals above illustrate, there are a lot of hidden costs being foisted onto patients and families that are based on entirely made-up numbers. There has been bipartisan support for PBM reform in the past. In a narrowly divided Congress, this is a clear opportunity to deliver a win for the American people.

BLOGS:

Monday: Testimony Before the Cleveland Utilities’ Board of Directors ([link removed])

Tuesday: Government Watchdog Group Applauds Air Force’s Decision to Forego Second F-35 Engine ([link removed])

Wednesday: Taxpayers Protection Alliance Urges DOJ to Abandon Airline Lawsuit ([link removed])

Thursday: Lifesaving Drugs are Already in Danger, and Biden’s About to Make it Worse ([link removed])

Friday: Intellectual Property is Everything and Everywhere in ShowBiz ([link removed])


MEDIA:

March 12, 2023: TPA was mentioned in an op-ed titled, “Don't give the IRS access to more of your data” in The Bozeman Daily Chronicle ([link removed]) (Bozeman, MT.), written by Sen. Ken Bogner.

March 13, 2023: The American Spectator ([link removed]) ran TPA’s op-ed, “Postal Monopoly Fails to Deliver Competition.”

March 13, 2023: WBFF Fox45 (Baltimore, Md.) interviewed me about delayed tax refunds in Maryland. ([link removed])

March 13, 2023: InvestigateTV ([link removed]) interviewed me and quoted me in their story, “Fraud Files: Pandemic relief unemployment fraud predicted to top $60 billion; government addresses issue.” *This story also ran in an additional 100 outlets across the country.

March 13, 2023: WCAX TV (Burlington, Vt.) quoted TPA in their story, “Fraud Files: Pandemic relief unemployment fraud predicted to top $60 billion; government addresses issue.” ([link removed])

March 13, 2023: Inside Sources ([link removed]) ran TPA’s op-ed, “White House’s Crystal Ball Gazing Does Nothing to Reduce Smoking.”

March 13, 2023: Martin Cullip joined Regulator Watch’s ([link removed]) ‘COP10 Bureaucrats to Decide Future of Vaping’.

March 13, 2023: TPA was mentioned in a story by the Washington Examiner ([link removed]) titled, “Ohio train derailment: Influential conservative group comes out against bipartisan rail safety bill.”

March 14, 2023: Dan Savickas joined ‘Just the News, No Noise’ ([link removed]) on Real America’s Voice to discuss President Biden’s budget, Entitlement programs, and the IRS.

March 14, 2023: I appeared on 55KRC Radio (Cincinnati, Ohio) to talk about inflation and baby formula.

March 14, 2023: The Ohio Star ([link removed]) (Columbus, Ohio) ran TPA’s op-ed, “Pro-Market Reforms Lead to Fewer Chemical Spills.”

March 14, 2023: The Tennessee Star (Nashville, Tenn.) ran TPA’s op-ed, “Pro-Market Reforms Lead to Fewer Chemical Spills ([link removed]) .”

March 14, 2023: TPA was mentioned in an op-ed titled, “Don't give the IRS access to more of your data” in The Missoulian ([link removed]) (Missoula, Mont.) written by Sen. Ken Bogner.

March 14,2023: WBFF Fox45 ([link removed]) (Baltimore, Md.) quoted TPA in their story “Is Baltimore City Council the "right size?”

March 14, 2023: Axios ([link removed]) mentioned TPA in its story titled, “Conservative groups oppose safety bill introduced after Ohio derailment.”

March 15, 2023: The Center Square ran TPA’s op-ed, “Bans will cause more harm than good in the Hoosier State.” ([link removed])

March 15, 2023: The Nashua Telegraph ([link removed]) (Nashua, N.H.) ran TPA’s op-ed, “White House’s crystal ball gazing does nothing to reduce smoking."

March 15, 2023: RealClear Markets ([link removed]) ran TPA’s op-ed, Pharmacy Benefit Managers Are An Unsung Source of High Drug Prices.”

March 15, 2023: Crain’s Chicago Business (Chicago, IL.) ran TPA’s op-ed, “State bill threatens Illinois data privacy. ([link removed]) ”

March 16, 2023: WBFF Fox45 ([link removed]) (Baltimore, Md.) interviewed me about a bill to reform the Board of Estimates.

March 16, 2023: I appeared on WBOB 600 AM (Jacksonville, Fla.) to talk about the SVB collapse and inflation.

March 16, 2023: Fox News ([link removed]) ran TPA’s op-ed, “No, Biden's budget is not like 'wacko' Reagan's.”

Have a great weekend!

Best,
David Williams
President
Taxpayers Protection Alliance
1101 14th Street, NW
Suite 1120
Washington, D.C. xxxxxx
www.protectingtaxpayers.org ([link removed])

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