A New Golden Age in Healthcare

As we approach the six-month mark of the Trump 47 presidency, we can see many notable new directions in healthcare policy.

But first lets consider what President Trump inherited from the Biden administration: a bloated department due to a four-year spending spree; a focus on woke priorities and heavy-handed mandates; and the continuation of systems that allowed domestic middlemen to control drug prices.  These were all key aspects of the laughably misnamed Inflation Reduction Act.”

This legislation, which Joe Biden signed into law three years ago, was a trojan horse of price controls.  To be sure, the sudden inflation of the Biden years sent many grasping for countermeasures, but policymakers should be mindful that the IRA caused this problem. 

That’s the lesson of a classic policy tome from that earlier inflationary era, Forty Centuries of Wage and Price Controls: How Not to Fight Inflation, published by the Heritage Foundation in 1978.

That work surveyed world history across six continents and found the same lesson about price controls: they have always failed in the long run.”  It recalled the early American economist Pelatiah Webster, who in 1791 recalled a recently failed experiment in price controls: It seemed to be a kind of obstinate delirium, totally deaf to every argument drawn from justice and right, from its natural tendency and mischief, from common sense and even common safety.”

And the record on price controls hasn’t gotten any better since.  Biden’s Inflation Reduction Act—which should have been called the Inflation Expansion Act—slapped counterproductive price controls on many types of prescription drugs, with more to come.

One result of this was a sharp drop-off in the number of clinical trials—the very stuff of future innovations for good health and life itself.  Calculations from the National Pharmaceutical Council show that industry-sponsored trials fell by more than 38 percent.

Another onerous aspect of this misbegotten bill was the pill penalty,” which gave bureaucrats the power to regulate the prices of small-molecule drugs (pills) sooner than for large-molecule drugs (biologics).

Determined to fix this misguided policy, President Trump issued an executive order on April 15. The misnamed Inflation Reduction Act,” he declared, put in place an administratively complex and expensive regime” that has led to inflated premiums and diminished coverage choices for seniors, prompting a taxpayer-funded bailout of insurance companies.”

Still, problems remain on the all-important matters of medical innovation and cure discovery: Other nations know that they can linger behind the U.S. on economic incentives while slapping on price caps and free riding on the development of new medicines.  Yet, as with all price controls, the benefits are brief and the total costs—to health, to fairness and to international sustainability—are severe. 

President Trump has an opportunity to truly solve this problem.  How so?  The U.S. can insist on a fairer international system, by negotiating to eliminate insidious non-tariff barriers—what international trade expert Shanker Singham refers to as anti-competitive market distortions (ACMD).  Singham’s ACMD metric, which provides a quantifiable measure of economic harms, can help policymakers identify and then remove obstacles that would level the global playing field.

In addition, because the U.S. has been paying a disproportionate share of military costs, Trump has pressed NATO countries to dramatically increase their own defense spending.  And it’s working. On June 24, Politico’s “Playbook” newsletter agreed, “Europe is about to become a much more active player in its own defense . . . Its genuinely world-changing stuff.”

The NATO model should be used to equalize the field in prescription drug prices – through strong trade deals, the Trump administration can require other countries to pay the same per capita percentage of GDP for innovative medicines that the U.S. pays.

Another key issue is Pharmacy Benefit Manager (PBM) reform. For many decades, the distribution of prescription drugs to patients has been clogged up by costly cartels.  Today, just three PBMs control 80 percent of the market.  Forbes magazine cites startling data showing that more than two-fifths of each dollar spent on brand medicines actually goes to these greedy middlemen. 

So what to do?  We can start by applying the wisdom of Louis Brandeis, the legend of the Supreme Court, who wrote more than a century ago, sunlight is . . . the best of disinfectant.”  Team Trump is indeed shedding light on the murky business of PBM cost-layering.  We share Brandeis civic faith: If the American people know all the facts, they will choose the path of reform.

In the meantime, Dr. Marty Makary, the new Commissioner of the Food and Drug Administration, is blazing his own trail.  He is traveling the country, listening to innovators—and taking strong action to improve transparency and accelerate innovations. This is something that has been sorely needed.

To be sure, the second Trump administration is still young.  Veterans of policy and politics know that plenty of controversies and difficulties lie on the path ahead.  But the opportunity is there for President Trump to reverse the Biden mess and usher in a new golden age in healthcare.

James P. Pinkerton worked in the White House domestic policy offices of Presidents Reagan and Bush 41. Jack Kalavritinos served in the Trump and Bush 43 Administrations at HHS, the FDA and the Office of Management and Budget.



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