The Trump plan for lowering prescription drug prices

By Curtis Ellis

“I am asking the Congress to pass legislation that finally takes on the problem of global freeloading and delivers fairness and price transparency for American patients. We should also require drug companies, insurance companies and hospitals to disclose real prices to foster competition and bring costs down.” – President Donald J. Trump, State of the Union address, Feb. 5, 2019

In his State of the Union address, President Trump called for bipartisan cooperation in tackling the challenges facing our country.

And he got a bipartisan standing ovation when he called for lowering the cost of health care and prescription drugs.

On this point, we don’t have to hold our breath waiting for Congress to act.

President Trump has already begun delivering.

The Trump administration is lowering prescription drug prices by taking on the health-care system’s middlemen, companies known as pharmacy benefit managers.

Today, drug companies set a price for their products, and then the middleman between the drug companies and insurance companies and doctors, the “pharmacy benefit managers,” negotiate a discount. They split this discount between themselves and the insurance companies. They keep that money for themselves.

For example, drug companies will sometimes agree to a steep discount in exchange for the benefit managers giving their drug preferred treatment over a competitor.

This is like a financial adviser that earns more money by steering you into investments that pays the adviser a bigger commission. Financial advisers aren’t supposed to do that, and President Trump doesn’t think health-care middlemen should either.

The Trump administration has unveiled a proposal that requires prescription discounts go directly to patients at the pharmacy counter instead of to middlemen and insurance companies.

As a result, patients will pay less at the pharmacy – which is good news for seniors and anyone who needs a lot of expensive drugs.

The pharmaceutical industry wins, too. Squeezing waste from the middlemen in the system is a better strategy than imposing price controls on the companies that produce life-saving, innovative drugs.

And there’s another side effect. The Trump administration aims to change the pharmaceutical industry’s pricing practices.

It starts with disclosing the real prices of drugs to patients. When you go to a restaurant, every item on the menu has a price next to it. When you go to buy a car, there’s a sticker on the window telling you what you’ll pay. Prices are clearly posted.

That’s not how it works in the health-care field. A tangle of rebates, discounts and opaque practices means different customers and different insurance plans pay different prices for the same treatment. Not good.

Consumers deserve to know the sticker price of drugs and treatments just as they do for everything else. Price transparency is essential for markets to function.

President Trump deserves credit for bringing down prescription drug costs and for using market forces to do it.

By reforming the FDA review process and removing regulatory barriers, the administration has sped the introduction of lower cost generic alternatives to pricey brand name drugs without sacrificing safety.

Now, it’s championing price transparency, an essential ingredient for a healthy functioning market, and for lowering health-care costs for Americans.

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