This weekly column offers opinions on the latest pharmaceutical industry news.
Dear President Trump,
When you met with several pharma executives last week, you complained about “astronomical” drug prices and promised to cut regulations so medicines could be approved faster.
That’s standard campaign fare. But one remark was particularly curious — you accused foreign governments of “freeloading” by imposing price controls on medicines, which cut drug makers’ profits and, as a result, make it more difficult to finance research and development. You promised, without specifics, to use trade policies so that foreign countries would pay their “fair share.”
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Let’s be blunt: Your idea is half-baked. Why? Because it is much more complicated than you think.
Unlike the United States, most other countries provide some form of insurance coverage for their populations and take responsibility for negotiating drug prices. Government agencies around the world have been pushing back against drug makers over the rising cost of medicines, a development that has proven not only popular with voters, but increasingly necessary given strained budgets.
Some Americans, however, grumble that they are, in effect, subsidizing other countries. That may be true, but the US has failed to take any significant steps to lower prices. And while you profess a desire to tackle this issue — and play to your populist base — you have sent mixed messages about allowing Medicare to negotiate. And you have only paid lip service to the idea of allowing drugs to be imported.
Perhaps this is because you have realized that the Republicans controlling Congress are unlikely to back proposals that would upset brand-name drug makers, who are big campaign contributors. Of course, you’re full of surprises and may yet take action. But using strong-arm tactics — in the form of trade deals that force other countries to pay more for medicines — must seem like an easier fix.
Well, good luck. Other governments are unlikely to acquiesce so easily.
“Expecting other countries to pay their fair share is patently absurd,” said Kurt Kessler of the ZS Associates pharmaceutical consulting firm. “It could quickly turn into a backlash against the US. Imagine the reaction from other governments: ‘You’re going to beat us with a stick and make us pay more for something, when our system already works well, so that it’s easier for Americans to pay less?’” said Kessler, who is based in Switzerland and specializes in global marketing strategies.
Just spin a globe and you can find any number of battles currently underway over pricing — in countries that are well off, and some that are less so.
In Ireland, health authorities are fighting Vertex Pharmaceuticals over the price of a cystic fibrosis drug. The Canadian government is in court hoping to win the right to seek restitution from Alexion Pharmaceuticals, which it accused of overcharging for a rare disease treatment. The Colombian health minister unilaterally cut the price of a Novartis drug after bitter negotiations failed. And the Chilean congress asked the president to establish procedures for sidestepping patents on medicines so that lower-cost versions could be produced.
The US is unlikely to be able to use trade agreements as leverage to raise prices abroad. Such pacts often require countries to protect drug makers’ patent rights. But they are not obligated to buy those drugs or to guarantee certain pricing in public hospitals, for instance. And under a World Trade Organization agreement, countries have the right to take the approach being pursued by Chile to create low-cost alternatives to pricey brand-name drugs.
There may be some routes open to you, however. Perhaps your team could pursue trade deals that eliminate reference pricing, which is when a government evaluates the effectiveness of different drugs used for treating the same disease and sets reimbursement based on the least expensive choice. Or you could restrict the use of formularies, which are lists of drugs that receive certain coverage.
“Any smart country would fight back, though, because they’re at the mercy of [pharmaceutical] monopolies,” said Brook Baker, a professor at Northeastern University School of Law and a senior policy analyst for Health GAP, a group that advocates for wider access to medicines. “It’s not that these countries are getting a free ride. What you see is a willingness to tame the excesses of a free market.”
There is another point worth noting.
Even if other countries began paying more for medicines, there is nothing to say this would result in greater research or more jobs in the US. Maybe drug makers would use the extra revenue for more research. That would be nice. But they could just as easily raise shareholder dividends or divert some of the money to more heavily promote their medicines. Most likely, it would be all of the above.
Meanwhile, though, you risk souring relations with some countries over a pocketbook issue that resonates widely no matter where you look. And it will do nothing to solve the affordability problem confronting many Americans.
So before you complain too much about others not paying their fair share, perhaps you should sort out how Americans can pay a reasonable share for medicines, too.
UPDATE: This column was corrected to reflect that the Canadian government is seeking restitution from Alexion Pharmaceuticals..