In open to amendment at any point. At this point, i offer the enemy , theed in substitute nature of the substitute will be considered as read in open to the open to it than that at any point. Chief now turn it to the of staff on the committee of taxation to provide a description of the amendment. I ask members to hold his questions until after his presentation. Hisisturb are told . Presentation. Mister bartold . Jcs x 10 and 11 in front of you underlying the nature of the substitute. This document describes to provisions. Two it is an allocated fee for 2017. It is 4 billion. In 2018, 4. 1 billion. It is allocated among manufacturers aced total market sales. The proposal before you would eliminate this fee for calendar years after 2017, effective in 2018. My colleagues have estimated this proposal will lose 24. 8 billion over the budget period. The other provision that is part of this it is budget reconciliation recommendation relates to the annual fee on Health Insurance providers. It is is allocated on total market share. The proposal before you would repeal the annual fee respectively, so effectively it were not apply for any period after 2016. The joint Committee Staff has wouldted this provision lose 144 . 7 billion over the budget period. Thats the close my brief description of the two provisions and would be happy to answer any questions the members might have. Thank you. Any questions about the amendment in the nature of substitutes . Mr. Levin is recognized. Information on the on the profitability of the pharmaceutical industry . Not at my fingertips, mr. Levin. Foreign dutch, pharmaceutical industry has been profitable over the recent past. Showsave a chartier that a chart that shows is 2012tability going back to , does anybody on your staff have the material on that, do you know . We have a lot of detailed allrmation across industries. I could prepare some information on pharmaceuticals if you would like. I did not know the committee would want the information. I do not have that act the table here with me currently. And the estimate of 24. 8 billion is based on what . The estimates for the pharmaceutical industry, remember this is i would say somewhat unusual tax structure. It is an aggregate see that is collected industrywide. Stated, the sea for 2018. 1 billion and it is actually 2. 8 billion for every year after 2019. The proposal would repeal the collection of those fees. Terms, 4. 1est billion plus 2. 8 billion is repealed pretty and our Economic Analysis since repealing taxes in one industry affects profitability of the industry, consumer demand across different industries, there is secondary as general equilibrium so there is some other tax effects with reporting to the committee the total effect on governmental receipts. That is the basis for the estimate of this proposal. It is a similar for the second proposal related to the fee on the healthinsurance industry. Handy thenot have information about profitability . I do not have with me that income earned by the industry. Isbegin to distinguish, this essentially an at size tax. Effectivelyx that in a somewhat different way that most other excise taxes. Can you repeat again that we all understand . An excise tax on the sales of the industry, the amount anyone company pays is based upon this total and divided across. Totally determined by their sales. You had to look at the gross sales in order to make this estimate . No, it goes to the administration collection of the tax. The assessment is fixed by statute. Again, as described on page 2 of see feeaggregate on importers and manufacturers, all the covered entitys is 4 billion for the current calendar for would be 4. 1 billion 2018. That is the amount said in the statute . Said in the statute. If the total amount of sales of the industry increases, it assessment4 billion for 2017. If the amount decreases, it remains a 4 billion assessment for 2017. Mr. Chairman, i think it is another indication on why we should have a hearing on this bill. So that we could hear from the pharmaceutical industry what their role was in putting together the Affordable Care act. And it would be interesting to hear what their role was and wasnt their position is now position what their is now formally in regards to this provision. Hearingif we had such a , we would find out that backtially this is a gift give back the gentlemans time has expired. Any questions about the amendment . Thank you, mr. Chairman. 10 00il now, it is after and we have been on small potatoes. 400 million for the insurance industry. 600 Million Dollars for the cancer causing entities and now we are into real money. The pharmaceutical industry will get about 25 billion of tax breaks, isnt that right . Reducerepeal would receipts yes, sir. This industry, you do not have the data at your fingertips per it would not surprise you, mr. Barthold, the most Profitable Industries in the country that report profits of more to 25 . I cannot comment on profit rate. The industry in general has been fairly profitable they are not exactly needy when it comes to tax breaks, are they . They have some the lowest tax rates, effective tax rates, dont they . Other tax comment on rates without looking at our data which i do not have available. I see. Idea not know you are in your testimony aware that this is a 25 billion with a b tax break and it only is directed to big pharma and not to generics, only to Branded Pharmaceuticals, isnt that right . That is correct. Companies like pfizer which has almost 200 billion of profits booked offshore. 181 subsidiaries. Any tax breaks in this provision for the Community Pharmacy over of the west aside of san antonio by Plaza Guadalupe a or Community Pharmacies around the country . I am not quite clear on your question. For this special tax provision that the republicans have provided here today, 25 billion for big pharma but there is not a penny for in the Community Pharmacies in the country, is there . As i was explaining to mr. 11, this is like an and size tax internet size tax on the manufacture excise tax on the manufacturer. With communitye pharmacies is they do not have one subsidiary offshore to dodge taxes. Pfizer has 181. There booked over twitter me a dollars of short booked over 200 billion offshore. It seems, arent these bit former companies able to take advantage of the research and Development Tax credit were taxpayers are justifiably not portioned a significant of the r d expenses . I am sorry. I do not catch all of your question. We have a host of legal ways for big pharma to dodge taxes and at the same time that air price gouges people all over this country. Pharmaceuticals that just about any other country in the world. It does not relate to this tax break and there is not a penny that a medicare recipient is going to get out of this provision. Only a 25 billion right back to the hands of big pharma. This provision resulted, did it not, from negotiations before the Affordable Care act to begin the legislative process in congress between the Obama Administration and the pharmaceutical industry in lieu the form industry doing something significant like breaking the medicare price negotiations which would bring down prices and address what President Trump calls literally murder by these pharmaceutical companies. I do not know that firsthand. I am aware of the reports after the time that the Administration Negotiations with multiple industry sectors. You are aware of the many comments President Trump estimated how our rages jura prices are and the need to work out to work out rages jura prices are and the need to bring them down. It would be good if you supporting something here. Rageousrages out drug prices are in the need to bring them down. Time has expired. I want to make sure i understand this book is my understanding is a little different than i have been hearing in the previous conversation. Lets do this piece by piece pretty this is a tax on patent or Branded Pharmaceuticals . That is correct. It operates like an excise tax, it is a fixed amount of revenue divided it is almost the retail volume of the Economic Analysis. Tax,has like an excise this generally in so being reflected in the Purchase Price of the pharmaceutical. Should we help our brothers and sisters understand what an at size tax in excise tax . It is woven into the retail . Thats the way excise taxes work area on the value or specific dollar amount. Is myt line of thought fellow members cared about on packet, branded, pharmaceutical pricing. This particular tax would be almost an immediate attachment to that pricing mechanism . Thatr Economic Analysis is the taxes passed through to consumers in higher prices for thank you, mr. Barthold. Whoever, right or left, one of your fixations is the pricing of pharmaceuticals, you now have an opportunity to vote to lower their prices. Thank you, mr. Chairman, yield back. What your rep. Knight . Thank you, mr. Chairman. Mr. Barthold so i understand this, there are two parts to this if i am correct. Pharmaceutical company fee and the Health Insurance company fee. 25 billion for pharmaceutical and 145 billion for the Insurance Company section, correct . Thats correct, mr. Thompson. Expenditureion tax unpaid for that comes out of the treasury, the loss dollars and will show up on the debt, the deficit, the cost to the taxpayers . These two provisions lose approximately 170 billion over the 10 year period outside of the context of whatever decision the committee make with respect to the budget, with respect to the legislation. For anyone who is worried about our debt or deficit, they should be of concern, correct . Own, it would increase the deficit. These came about, i recall, during the drafting of the Affordable Care act. Pharma came to congress and said we understand what it is you are trying to do and we understand we are going to participate in this and this is how we believe this would be a fair contribution on our part to this. Is we arewere saying going to give that back and create this big hole in our budget . As i responded to mr. Doggett, i understand that there were negotiations with the administration, members of congress, i do not have firsthand knowledge of representations this is been pharmaceuticals, not the small drugstores. The small mom and pop. Home delivery of drugs. Small momandpops that stay open on saturday and sunday to make sure their customers get the services they need or in many cases, carry credit for people in the community. This is big pharma . As i noted, manufacturers excise tax and also applies to importers and those industries tend to be larger firms. Now, 170 billion we do not have unpaid for. Loss ofotal revenue these provisions would be 170 billion. The gentleman from arizona was making to the case we were to pass this bill and big pharma was to receive this 170 billion windfall that consumers would see benefit from this because their prices would go down. Is there anything in this bill that requires a dollar for dollar gift back to consumers . Is no requirement. The Economic Analysis that i discussed based on market economics. So, in fact if this were to theirnd big pharma got to 170 billion, we dont know if they reduce prices by similar amount . Clarify one thing so it does not get confused as we discussed further, the 170 be a dollars 170 billion understand. Law,eres no guarantee in chance to pass an increase or decrease in excise taxes through to final consumers. We have no way of knowing if that will happen. They are getting the 50 a peel now. Pill now. Why would we think they would feel like a good fairy and deliver . Things are not guaranteed. There is uncertainty. Would it be appropriate to put a provision in this bill that says that if it passed and this 170 billion windfall were to materialize, it would be reflected in Price Reductions . That is not that is not his expertise. Is that something your Expert Opinion could be drafted and put in the legislature . If the members chosen that policy, we would help them draft the legislation. Time has expired. You are recognize. Your here back in 2009, right . Yes, i have been here a while. You have spent time around the committee. I have. Tell me what that these things have in common. 10 sales tax on indoor tanning. [laughter] easy for me to say. Numeration from certain , business expenses. Onating a 2. 3 excise tax sale of certain medical devices. Increase of tax on Health Savings accounts area a repeal of tax on a tax on overthecounter medications. What do those have in common . Excuse me . What do they have in common . What are they part of . They are all part of the Affordable Care act. Oh, the all portable care act what were doing is repealing those things as they were in the Affordable Care act. This is not a mystery. Everything we are repealing in a it wasll, mr. Barthold, maybe part of the Affordable Care act or was it . It was clearly part of the Affordable Care act. Anything in this legislation we are cutting taxes on like members of Congress Salary that was not part of the Affordable Care act . I think there are a couple of modifications related to Health Savings accounts. What are those . Items from the Affordable Care act. I think we will talk about it later. The expansion in joint spousal contributions to Health Savings accounts and making it better for consumers. Highdeductible deductible plans. That benefit consumers. The point is the tax sections of thels we are provisions of we are repealing in this code were all taken from the Affordable Care act. That is correct for you you are looking at provisions from the Affordable Care act. On thee went further tanning tax or medical device tax or Prescription Drug tax, we didnt in any of those. We took the language, all of the ones mentioned exactly as was passed in the Affordable Care act. There is no modification aside from repeal effective after 2017 and in the case of the pharmaceuticals, effective after 2016. And the healthinsurance industry tax. The point is identical provisions. Thank you. For every other question asked for the reminder of this markup, same. Swer is the chairman brady and this side did not come up with ways to tweak different tax cuts. We just went back and repealed all of the taxes that were put in place by the Affordable Care act. For my colleagues on the left side, i think we repealed and my 2010,60 times in 2012, 2014, 2016 campaigns, i said i was going to do this. It should not come to a surprise to anybody in that chairman brady and the rest of us who have talked about this for seven years are doing exactly what we said we were going to do, which i guess in washington is a best of us is a bit of a shock. You. Ank thank you. Friend andh my dear colleague. You guys are doing exactly what you said you were going to do. There is no question about that that sprint mr. Barthold, in as thef whats we expand nation in healthcare costs, what percentage of our gdp does it amount to . Where does it stand on among the other nations of the world . Our Health Expenditures exceeded that of all of the western thef all the nations in world, i think switzerland is the next closest, 11 . Do they have universal Health Coverage . Do you know that . Is that pretty much true . I dont know the swiss system. Wasnt president obamas ,ntent as people came together until the famous document came up from the republicans that set block everything it every expense and pull out of any negotiations, even though pharmaceuticals and Insurance Companies and others stayed and in fact negotiated what they thought perhaps could be fair. I know you said earlier to mr. Thompson and mr. Levins inquiries that you heard stories. Lets say for argument sake that that is true. Points out that there is no surprise here in terms of this repeal and 63 times over six years you have said you are going to repeal it. Will not sing replacement and we do not have any cbo numbers on that. We do not actually have the data even though you have struggled tremendously. Just an inquiry here. We understand what they are repealing and mr. Thompson was inquiring earlier that 25 billion that we are concentrating on now and in the additional, i dont know amount of money that leaves 170 billion, who does that come from . The taxes in each case is in the case of the pharmaceutical industry the manufacturers or importers are the Health Insurance fee providers as i was explaining so clearly there has to be some guarantee that in this bill it going to be received by the consumer so i guess we can assume when we get this cbo report we will see a subsequent that they will see the consumer, the beneficiary here will receive a deduction of that amount and they will see their cost automatically dropped down immediately by 170 billion or so. Wouldnt that be correct if im following the train of thought . Taxes, we think that the long evidence is that excise taxes are passed on to consumers. We can expect what President Trump has said that there is a provision in the bill anywhere for direct negotiations with the pharmaceutical Companies Like our veterans and m