Trump Administration Must Correct Drug Price Control Executive Order Before the Damage Is Done Print
By Timothy H. Lee
Thursday, August 06 2020
Why would we emulate those systems, with far fewer new drugs and significantly worse health outcomes?

Imagine a political candidate promising, "Under my healthcare proposal, we will slash the number of new lifesaving drugs created and introduced to American consumers by 50% or more going forward."  

Come again?  

In all likelihood, you’d immediately wonder whether the candidate offering that proposal was intentionally trying to lose your vote.  

Believe it or not, however, a new White House executive order to import drug price controls from foreign nations practicing socialized medicine would have precisely that effect. It amounts to an unforced error that, if implemented, will end up hobbling America’s world-leading pharmaceutical sector and immeasurably harming American consumers.  

Fortunately, there’s still time for the Administration to come to its senses and reverse that new misguided policy proposal.  But the clock is ticking.  

At issue is an executive order announced recently by President Trump, which would begin dictating prices for Medicare Part B medicines using what’s called a "Most Favored Nation" rule or an "International Pricing Index" (IPI).  That index would be formulated based upon foreign nations’ government-set prices in their own socialized healthcare systems.  As a consequence, the new executive order would peg prices to what nations like Britain, Canada, Japan and so on permit.  

The announcement makes even less sense when one considers that under our current system, prices for the 50 most popular Medicare Part B drugs have actually declined in recent years.  Other nations whose price controls and socialized healthcare policies the executive order would import, however, simply dictate prices under threat of violating patent protections and a "take it or leave it" approach.  

And, as a result, those nations and their consumers simply don’t receive the same drugs that American consumers currently enjoy.  

A Galen Institute analysis confirms that American consumers can access nearly 100% of new cancer drugs developed over the past decade, compared to 73% in Germany, just 66% in France, 56% in Canada, 50% in Japan and 11% in Greece.  

That, in turn, translates to superior cancer survival rates in the U.S.  American survival rates for pancreatic cancer are double that of Britain, and survival rates for brain cancer are 36.5% in the U.S. versus 27.2% in France and 26.3% in Britain.  Stomach cancer survival rates in the U.S. stand at 33.1%, 26.7% in France and 20.7% in Britain.  The U.S. cancer mortality rate is 20% lower than Britain’s, and 10% lower than Canada’s and France’s.  

Why would we emulate those systems, with far fewer new drugs and significantly worse health outcomes?  

Per the candidate hypothetical above, the consequences for American consumers could be disastrous.  According to the nonpartisan Congressional Budget Office (CBO), these proposals would mean between 8 and 15 fewer new medicines entering the domestic marketplace over the next decade.  

Even worse, the White House’s own Council of Economic Advisors conducted a separate analysis, which determined that importing foreign price controls could mean 100 fewer new medicines brought to market in the U.S. over the ensuing 10 years.  And a California Life Sciences Association and Biocom analysis determined that the proposal could slash the number of new treatments by a frightening 88%.  

The reason for that is simple.  Compared to other nations’ socialized healthcare systems, the U.S. respects market principles and honors patent rights of pharmaceutical innovators.  That, in turn, encourages innovation, research and development.  In 2018 alone, the top 15 drug manufacturers spent over $100 billion on R&D, which constitutes a 32% increase over the preceding five years.  That’s how new drugs get developed and brought to market, and that’s how improving medical outcomes occur.  

That’s also why America accounts for twice as many new drugs introduced worldwide than the rest of the globe combined.  Already, American pharmaceutical innovators are leading the race to develop coronavirus vaccines and treatments as well.  

Those realities render the White House’s executive orders inexplicable, and contrary to its three-year record of deregulation and fidelity to market principles.  In his 2020 State of the Union speech, President Trump promised American voters that, “I want you to know that we will never let socialism destroy American healthcare.”  By introducing socialist drug price controls imposed by foreign governments, however, the recent executive orders would open the door to precisely that threat.  

Over the past four years, the Trump Administration has demonstrated a welcome fluidity and fidelity to deregulatory principles.  Hopefully, the White House quickly recognizes the potential danger of drug price controls imported via its executive orders, and corrects course sooner rather than later when costs begin to accumulate.