President Trump’s America First agenda guides his policy on everything from taxes to immigration. But his State of the Union address featured a nod to the international price-control scheme for pharmaceuticals that the Department of Health and Human Services is currently considering, which would put American interests second to bureaucratic price controls of foreign governments.
Make no mistake: This proposal would harm innovation and the quality of health care at home. That’s why the Trump administration should scuttle the plan and instead refine policies that build on America’s strengths and leadership in health innovation.
Congress recently held a hearing on prescription drug prices, and explored many of the complex factors going into pharmaceutical costs. Chairman Richard Neal, D-Massachusetts, said in his opening statement, “One of the challenges we face is understanding the underlying problem. Drug companies point to the PBMs who point to the insurance companies who point to the hospitals.”
Multiple factors are certainly at play, as Neal said, but some of the solutions put forward by legislators and by the Trump administration would make the problem worse, not better.
Drug prices are an important issue for millions of Americans, and there are many paths forward for policymakers. Removing FDA red tape and unnecessary medication taxes, and increasing government oversight of health care programs are all legitimate ways that the government can tackle this issue head-on.
Unfortunately, the signals being sent by HHS would make it harder for Americans to get the pharmaceutical treatments they need.
The proposal currently being considered by HHS would allow for international price controls set by foreign governments to serve as benchmarks in the United States. This would mean creating an “International Pricing Index” to tie what the government will pay for for certain Medicare Part B drugs to what other countries with socialized medicine and price controls say the drugs should be worth — not their actual value to patients and providers. Besides the obvious violation of American sovereignty, this would mean Americans are hostage to the pricing schemes of international bureaucrats. There’s no good reason Trump should allow this to happen.
The American drug market is already unfortunately saddled by slow bureaucratic procedures. The Food and Drug Administration is historically cautious when reviewing and approving new drugs. Although FDA has been admirably working to moderate this tendency, it frequently takes over a decade for new cures to hit the market. Generics and biosimilars are held back too.
Yet despite all this, almost half of all new pharmaceutical innovation still occurs in the United States — and it’s because we allow our own policy to guide innovation. Pharmaceutical research and development in the United States leads the world, and Americans have access to cutting-edge treatments that are unavailable in other countries. Current government regulations handicap too much innovation in the United States — why make matters worse by introducing European-style controls that would undermine America’s leadership in life-saving drug development?
Economists agree that the international pricing index would be disastrous for Americans. In an open letter to HHS Secretary Alex Azar, 175 economists write that this proposal would be “to the detriment of the health care system at large and investments in U.S. research and development … patients will suffer as cures are delayed or entirely undeveloped.”
The HHS International Pricing Index plan would be rejecting the America First vision that the president espouses and moving away from the free-market vision that HHS itself articulated prior to floating this plan. Taxpayers would suffer too, because the cures developed in this country help to save precious resources that would otherwise have to pay for even costlier treatments in Medicare, such as hospital stays or surgeries. Over the long run, Medicare’s finances will worsen, all for some illusory short-term “savings” supposedly generated by following Europe’s command-and-control approach.
The HHS pricing scheme would drive down American investment in key life-saving drugs by implementing international price controls. Fortunately, there are better ways — solutions that build upon the American exceptionalism the administration so often stresses. By doing things such as tackling harmful regulations, repealing unnecessary medical taxes, and making sure that the government tightens its oversight role, more progress will be made on controlling prescription drug prices.