The Political Race for Fewer Cures

Hindustan Times

a day ago

America is leading the world into a new era of medical cures and biologic treatments, and the benefits to human health promise to be staggering. Yet why is America's political class—first Democrats and now Republicans—working hard to delay and maybe forestall this progress?
Democrats have done much harm already with their Inflation Reduction Act price controls, as research and venture funding have declined. Now comes President Trump, who last week threatened drug companies with price controls or worse if they don't cut prices as he wants.
Mr. Trump's excuse is that other countries are 'free riding' on American innovation. His solution: Demand manufacturers give Americans their 'most-favored nation' (MFN) price—i.e., the lowest in other developed countries like Canada and the U.K. If drug makers refuse, he may yank their drug approvals, harass them with lawsuits and more.
'If you refuse to step up, we will deploy every tool in our arsenal to protect American families from continued abusive drug pricing practices,' Mr. Trump wrote to 17 large drug makers on Thursday.
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It's true that countries with government-run health systems like Canada, the U.K. and France pay less for drugs than Medicare and U.S. private insurers do. But the price disparities Mr. Trump cites don't include all the discounts that U.S. manufacturers provide insurers, hospitals, pharmacies and the feds.
A Berkeley Research Group study last year found that drug makers received about 50% on a dollar of revenue for every drug they sold in the U.S. The rest was paid out in fees and discounts to intermediaries and the government. Some discounts are passed onto Americans through lower insurance premiums, though some boost hospital and insurer profits.
Medicare and Medicaid spent $181 billion on prescription drugs in 2023 versus $662 billion for hospitals. Patient out-of-pocket spending on prescription drugs accounts for about 1% of U.S. healthcare spending. Drugs aren't the main driver of healthcare premiums, patient costs or government spending.
Manufacturers benefit for a few years from patent protection after medicines launch, but then they face stiff competition from follow-on medicines and generics. Prices typically fall by more than half after patent protection ends. Sales of AbbVie's auto-immune blockbuster Humira have shrunk by more than half since its patent monopoly ended in 2023.
Unbranded generics in the U.S. make up 90% of all prescriptions and cost one-third less than in other economically developed countries, according to RAND. Generics also make up a much larger share of prescriptions in the U.S. than in other countries. That's because higher manufacturer list prices provide an incentive to develop biosimilars and generics.
This market competition can reduce prices more than government price controls while providing an incentive for drug makers to continue to innovate. Mr. Trump's order would do the opposite by discouraging development of generics and new breakthrough treatments.
Mr. Trump claimed last week that drug manufacturers receive 'generous research subsidies.' Not true. Universities do, and some of their research can lead to future drugs. But the pharmaceutical industry spent $141 billion on research and development in 2022, nearly 40 times as much as the National Institutes of Health did on research directly related to drug development.
Browbeating companies, as Mr. Trump is doing, could spur them to move more intellectual property to China, where Xi Jinping is rolling out the red carpet. And it will likely result in fewer new drugs developed and sold in the U.S., especially in riskier research fields like neurologic and rare genetic diseases.
If drug makers refuse Mr. Trump's MFN price, he has directed his Attorney General and Federal Trade Commission to take antitrust 'enforcement action.' Mr. Trump also ordered his Food and Drug Administration Commissioner Marty Makary to modify or revoke approvals 'for those drugs that maybe be unsafe, ineffective, or improperly marketed.'
Translation: Nice medicine you have there. Terrible if something happened to it.
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It's not clear what legal authority Mr. Trump plans to invoke to do any of this, and it would presumably need a rule-making that could be challenged in court. His plan appears to usurp Congress's power over commerce and violate the Supreme Court's major questions doctrine. It may also violate due process and property and contractual rights.
Mr. Trump had a chance to include drug prices in his trade negotiations with other countries. But he failed to do so with Europe and Japan. Instead he is now going to import foreign price controls to punish U.S. companies—and the Americans who will get fewer cures as a result.