| Today's Managing Health Care Costs Number is 1/6 |
Kaiser Health News and the New York Times have reported on the four page Trump executive order to decrease drug prices. He's going for irony -- he will decrease drug prices by raising them.
The recommendation comes from Trump's Drug Pricing and Innovation Workgroup, which is chock full of pharma industry executives. As Kaiser Health News reports:
To solve the crisis of high drug prices, the group discussed strengthening the monopoly rights of pharmaceuticals overseas, ending discounts for low-income hospitals and accelerating drug approvals by the Food and Drug Administration.
So - the administration thinks that if pharma companies are able to earn more dollars in India or Brazil they will lower their prices in the US? That's simply not how pricing works! The pharmaceutical companies have been plenty profitable overall and that has not led to any relief of steady price inflation. Drug companies charge what the market will pay - and allowing them higher profits in one arena doesn't simply lower prices somewhere else. New oncology and specialty drugs routinely cost over $100,000 a year, and price increases on existing medications continue to outpace inflation.
The Administration would also decrease 340b discounts to hospitals and providers who serve low income communities. Exactly how that would help drug prices? It would increase pharmaceutical industry profitability allowing the drug companies to lower their prices overall. Does anyone really believe that?
There's more. The executive order could allow pharmaceutical companies to provide marketing material to insurers and pharmacy benefit managers before FDA approval, and "use less rigorous clinical trial standards to speed drug approvals." I can see how this could decrease value (encouraging the use of new expensive drugs with little or no benefit beyond older established drugs). But I can't see how this will decrease cost!
The FDA released a blog post promising action to prevent brand name legal tactics that delay introduction of generic medications. That is one element of the Trump plan that could lead to some price relief. However, the problem we face is the cost of brand name drugs. We should push to get faster approval for generics, and we should allow importation of generics from other developed countries when we face shortages in the US.
But we need action to decrease the price of new medications. There are potential answers out there:
- Medicare could negotiate prices (prohibited by the Medicare Part D enabling legislation).
- The FDA could consider cost in drug approval (prohibited by current rules).
- The National Institutes of Health could "march in" and retake patents for drugs which are priced too high
- We could implement an excise tax on excessive prices. We could enable payments for expensive effective medications over the period of benefit rather than "up front."
Here are a set of recommendations from Consumer Reports
But the Trump Administration drug plan is the answer to the pharmaceutical industry's wish list. It will raise overall drug costs abroad through actions to protect patents, and it will raise overall drug costs here by cracking down on 340b discounts.
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