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Trump’s drug pricing reforms lack bite

Published on 12/02/18 at 09:55am
IMAGE: Wikipedia/Gage Skidmore

President Trump’s rhetoric leading up to his election had the pharmaceutical industry very worried – his often quoted line about drug companies “getting away with murder” was followed by the suggestion that he wanted to “bring our prices down to what other countries are paying”.

This line of attack was repeated various times during his campaign, and worried the industry that he might try push the US towards government-negotiated prices on drugs once he came to office. It was enough to push down share prices across the industry whenever he spoke on the topic of drug pricing.

Now, after the Trump administration finally revealed a concrete strategy on how to actually manage to lower drug prices, it’s revealed that the bark was definitely worse than the bite.

The main players to blame for high drug prices are, according to the report (Reforming Biopharmaceutical Pricing at Home and Abroad), inefficient government regulation and foreign governments. In practice, this has the White House advocating for the drug-discount program for hospital that care for poor communities to be limited and to target pharmacy-benefits managers responsible for negotiating prices.

The report also takes large swipes at foreign governments’ pricing strategies, with the White House press release on the report reading: “Global financial returns from product development drive innovation. But those returns are unfairly low today. This is because most foreign governments, which are the primary buyers in their respective pharmaceutical markets, force drug manufacturers to comply with pricing rules to gain market access. Through this leverage, foreign governments are able to set drug prices below those that prevail in the United States and erode the returns to innovation manufacturers might otherwise see from selling in their markets”.

It also notes that US citizens pay in excess of 70% of patent pharma profits whilst only accounting for 34% of OECD GDP at Purchasing Power Parity. However, it seems odd that the Administration is challenging other countries’ decision to negotiate more aggressively with drug companies rather than attempt to mimic this approach to drive down its own costs.

The announce will do nothing to dispel accusations suggesting the White House is too cosy with the industry, given that the announcement firmly aligns with the pharma industry’s stance that it is not to blame for high prices whilst stressing that high profits are needed to ensure that R&D into new innovations are required.

Peter Maybarduk, Director of Public Citizen’s Access to Medicines Program, noted some positive but was critical, overall, on the announcement: “There are some positive ideas in the Council of Economic Advisers’ report that would yield some savings for the government (reducing physician incentives to administer expensive medications) and patients (out-of-pocket caps). Yet these savings and reforms are insignificant compared to the reforms that would be possible if the White House simply stood up to prescription corporations.”

It should be noted that pharma companies may feel the pinch in some regards, for example, in the case mentioned by Maybarduk, whereby incentives for prescribing more expensive medications are removed.

Most of the changes recommended by the report will be possible through internal rule making, meaning that Trump wouldn’t have to approach Congress to push through the changes.

Ben Hargreaves

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