t wasn’t too long ago that President Trump said drug makers are “getting away with murder.” But it sure sounds like he’s about to grant them a presidential pardon.
For months, Trump has kept these companies off balance with remarks that suggest he’s willing to consider ideas they find abhorrent in an effort to rein in drug prices. Now, though, his team is reportedly considering moves that would do little to address the problem — and would instead please the pharmaceutical industry.
To be fair, these proposals, which were first reported by Kaiser Health News, still appear to be in the early stages. But before the Trump advisers go any further, they ought to revamp what they have.
Why? For one thing, the effort to curb prices by executive order is likely to be a waste of time.
“It’s basically fluff,” said Ira Loss, of Washington Analysis, who tracks the pharmaceutical industry for investors. “For them to really do anything meaningful requires legislation, not an executive order. And therein lies the problem — the Republicans who control the Congress don’t favor legislation.”
With that said, let’s look at why some of the ideas Trump team is kicking around may be problematic.
First up is a proposal to strengthen overseas monopoly rights for drug makers. Specifically, the Trump team would extend patents for drugs in foreign countries. The idea is to stop the widespread practice of overseas customers paying a lot less than Americans for the same brand-name medicines, which Trump has tarred as “global freeloading.”
That sounds like a noble idea. After all, why should Americans shoulder more than their fair share of drug costs? But there may be a flaw in this thinking. Basically, this would allow drug makers to maintain high prices overseas — but there is no guarantee companies would lower prices in the U.S.
“There is zero evidence that raising drug prices in foreign countries lowers them here,” said Jamie Love of Knowledge Ecology International, an advocacy group that studies patents and access to medicines.
Another idea the Trump team is eyeing is value-based pricing, which generally refers to deals in which drug makers offer extra discounts to health plans if their medicines don’t work well for certain patients. But as Kaiser Health News noted, it’s unclear who would audit drug effectiveness, how this would be evaluated, or who would get the rebates. As one Wall Street analyst noted, the notion may prove to be a smokescreen.
“This has been the drug industry’s preferred solution to the question of drug costs. While the argument, in principle, is logical — drugs should be priced to the value they provide — it turns every debate on drug costs into a convoluted economic calculation,” Sanford Bernstein analyst Ronny Gal wrote to investors.
“And the drug industry has, so far, run circles around payers in developing [an] economic model for the value of drugs they provide. To the extent value-based-pricing is adopted as the main way to address drug costs, the industry will likely be in the clear on the drug issue for roughly a decade.”
Yet another scheme reportedly under consideration in the White House: issue 10-year U.S. Treasury bonds to pay for pricey hepatitis C medicines, so that Medicare and Medicaid would not have to ration treatments to the sickest patients. Details are not available, but early analysis suggests this would still cost the government the same amount of money while adding to the federal debt, a feature that is likely to anger conservative members of Congress.
The draft document for an executive order also cribs from a policy paper from the pharmaceutical industry trade group, which proposed that regulators use less rigorous clinical trial standards to speed drug approvals, according to Kaiser Health News. This may save drug makers R&D costs, but once again, fails to guarantee lower prices.
In recent years, for instance, the Food and Drug Administration approved some cancer drugs based on tests showing reduced tumor size in the short term; but drug makers didn’t have to prove patients actually lived longer, which requires spending more on studies. This drop in approval standards may have reduced R&D costs, but prices for cancer drugs “increased dramatically,” explained Diana Zuckerman, who heads the National Center for Health Research, a nonprofit think tank.
Other ideas will likely still come and go. But what is also troubling is the draft is being assembled with input from people with ties to the pharmaceutical industry. In fact, the working group is led by a former Gilead Sciences lobbyist who is now at the White House Office of Management and Budget. And there is no sign that independent patient advocacy groups are involved.
“It’s clearly industry-friendly,” said Michael Carome, who heads Public Citizen’s Health Research Group.
Weighing industry concerns is certainly reasonable, but this is hardly an example of “draining the swamp” that Trump so enthusiastically promised to pursue.
If the Trump team wants to lower drug prices, they should confront the problem directly and seek specific steps that can have a direct impact on prices.
Right now, it’s hard to see how this effort will do anything but drain American wallets.