President Trump launched his American Patients First program to lower prescription drug prices, and it has liberals howling.
Why? Because the president uses the tried and true American formula of greater innovation and less government to achieve what Democrats have failed to do with more government, more bureaucracy and less private enterprise.
It’s important to understand how putting American Patients First lowers prescription drug prices.
Thanks to decades of increasing government control and corporate consolidation of health care, the American pharmaceutical market is a maze of opaque pricing, hidden rebates, most-favored-player discounts, international price controls, government programs, taxes and mandates that have had the (sometimes) unintended consequence of raising prices for American consumers.
President Trump understands that cutting drug prices requires cutting the administrative state.
He starts by streamlining the clinical drug trial process, the most costly aspect of new drug development, to spur innovation without sacrificing safety.
Competition is a time-tested tool for reducing prices. The administration is identifying and eliminating regulations whose sole function is to stifle competition.
To prevent big players from gaming the system to quash upstart rivals, the president has ordered the Food and Drug Administration commissioner to ensure rules aren’t used to create obstacles to competition.
Studies show that multiple generic alternatives for a brand-name drug reduce prices for consumers. The FDA will prioritize applications for low-cost generic alternatives to brand-name drugs that currently have no competition to make sure they come to market as soon as possible. The goal is to have three approved generics for a given brand-name drug. In 2017, the FDA approved a record number of generic drugs and the highest number of novel medicines in decades.
Reducing barriers to entry is just one part of President Trump’s strategy. Increasing pricing transparency is another.
Restaurant menus list prices for each offering, and the prices are the same for every customer. Not so with health care.
Hidden rebates, variable discounts and complex reimbursement formulae are the norm, making it impossible for the consumer to know the true price for a given product. Pharmaceutical manufacturers’ discounts, rebates and other price concessions totaled $127 billion in 2016, according to a recent report. These payments go to hospitals and insurers and are hidden from consumers. A market cannot function without price transparency.
The Trump administration has begun hacking away at the thicket of regulations around Medicaid, Medicare and Part D that hides – and raises – prices consumers pay. Health and Human Services is proposing a rule change that would pass prescription drug rebates directly to consumers.
Along with eliminating competition-thwarting barriers that subsidize entrenched interests and scaling back regulations that favor insurance companies, drug distributors and health-care corporations at the expense of consumers, the president is addressing the perverse situation that has American patients paying twice – once for for their prescriptions and again to fill prescriptions for freeloading foreigners.
Other countries, including Canada and Mexico, our neighbors in NAFTA, impose price controls on drugs. American pharmaceutical companies have to recoup their R&D costs somewhere, and they do it by raising prices on Americans. Lower prices abroad result in higher prices here.
As President Trump renegotiates NAFTA, he’s directed the U.S. trade representative to make drug prices part of the bargain.
The president’s liberal critics are in a snit. His plan runs counter to their preferred prescription for more government, more regulation and more corporatist deals.
It also refutes Democrats’ snake oil cure for lower drug prices: re-importing (apparently) lower-cost prescription drugs from Canada. As we’ve seen, Canada gets away with lower prices only because pharma makes up lost profits by raising prices in the U.S. Extending Canadian price controls to the American market kills the goose laying the golden eggs.
That’s not the only casualty from the Democrats’ plan for prescription drug imports. It would guarantee entry to more unsafe counterfeit drugs made in Third World countries and more Chinese fentanyl, the deadly opioid flooding into our country from Canada.
Instead of relying on make-believe solutions, more government rules and more corporate bureaucracy, President Trump puts American patients and American private enterprise first to lower drug prices.