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January 24 2018

Is Trump Keeping His Word on Pharmaceutical Drugs?

by Hadley Heath

High drug prices are one of Americans' top concerns, regardless of political party. It's not surprising, then to hear politicians on both sides of the aisle promise to address the issue.

President Trump was no different. When we ran for office, he repeatedly slammed the drug industry, even suggesting that companies are "getting away with murder." His opponents, Hillary Clinton and Bernie Sanders, also highlighted high drug costs as part of their campaign agenda. But now that he's in office, President Trump has come under fire in the media for failing to attack drug prices. 

The issue is harder than it looks: The question is not whether Amerians want action, but what can be done. Often, politicians' first instinct looks like the easy route: price controls. It would be easy enough to tell drugmakers that they can only charge, say, $5 per pill, but the consequences of price controls are clear where they've been tried. They result in shortages as drugmakers cannot recoup the high costs of their investment (in research and development, FDA trials, and the manufacture of drugs). Price controls look like an easy answer, but they ultimately hurt patients/consumers more than they help as drugs become inaccessible entirely.

The other oft-proposed solution to high drug costs is allowing Medicare to negotiate prices with drugmakers. This sounds a little more market-friendly, maybe because of the word "negotiate." But this policy idea, too, is really just price controls by another name. Medicare is a huge payer in American health care, insuring more than 55.5 million American seniors, and seniors consume a disproportionately high amount of the nation's prescription drugs. Private insurance companies often look to Medicare as a reference point for pricing as well. Medicare threatens to act like a monopoly (technically a monopsony) in this proposed "negotiation" (and it would certainly be one if the program were expanded to be, as Bernie Sanders wants, "Medicare for all," or a single payer system).  

So what else can be done? Actually, this is where the Trump Administration has taken some action: Increasing competition among drugmakers. Food and Drug Administration commissioner Scott Gottlieb has pursued several policy changes that could foster greater competition from generic drugs, which are usually cheaper than brandname drugs, by highlighting areas for opportunity and expediting FDA approval. Although these might seem like small steps, Gottlieb deserves credit for this. 

The other major reforms that could help consumers access more affordable drugs are mostly out of Pres. Trump's hands for now -- the issue really belongs to Congress because of the way health payment, health insurance, price transparency and competition (or our current lack thereof), and the Medicare and Medicaid programs are controlled by federal statute. Ironically, so many of Congress's previous efforts to control healthcare costs (usually by mandating various services or drugs be paid for via health insurance) have backfired by removing consumers from any decisions about price and value.

It's frustrating to all Americans that we need certain services and drugs, but we don't know how much they cost compared to other options, and we can't sit in the room when bureaucrats, insurers, hospitals, and drug companies make their agreements. To really restore competition in health care and lower costs (including for drugs), we should work to move our policy in the opposite direction, closer to the individual patient. 

Independent Women's Forum is an educational 501(c)(3) dedicated to developing and advancing policies that aren’t just well intended, but actually enhance people’s freedom, choices, and opportunities. IWF is the sister organization of the Independent Women’s Voice.​
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