On Unicorns and Prescription Prices

On Unicorns and Prescription Prices
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Since taking the Oath of Office just 16 months ago, President Trump’s tenure as Chief Executive has been marked by notable successes — such as tax reform — and partisan controversies, such as alleged Russian collusion. What’s remarkable about the president’s brief tenure isn’t so much that there have been successes or controversies. This, of course, is true of any new administration. What’s remarkable is the unprecedented partisanship and division. There is no middle ground on issues where Left and Right might agree to disagree. Politics today is a blood sport: It’s not enough to win the argument; you must destroy your political enemy.

Taxes, the environment, foreign policy, judges, immigration, entitlement reform, health care — there are fewer and fewer issues where both Republicans and Democrats can come together to work out policy solutions. Virtually the only thing everyone agrees upon is that drug prices are too high. Indeed, high drug prices just might be Washington’s last “policy unicorn.” It’s the mystical policy area where Senator Chuck Schumer (D-NY) and President Trump might agree.

Earlier this year in his State of the Union speech, President Trump reaffirmed that one of his highest priorities is to reduce the price of prescription drugs. “In many other countries, these drugs cost far less than what we pay in the United States,” Trump said. “That is why I have directed my Administration to make fixing the injustice of high drug prices one of our top priorities. Prices will come down.”

Even though both political parties agree that Americans are paying too much for their medications, very little has been done over the past 15 years to solve the problem. President George W. Bush had a Republican Congress, yet his administration did little to bring market reform to the crisis of rising prices. Though President Barack Obama enjoyed a Democratic supermajority for the first two years of his first term, he squandered this opportunity to address rising drug costs. Instead, Democrats leveraged their majority to jam through Obamacare. Big-League failure by both political parties.

President Trump’s instincts are right when it comes to drug prices. The question is what will he do. Will he go the way of “The Swamp,” or accomplish what’s necessary, and what previous administrations have failed to do? Thus far, the president has given mixed signals. For instance, while the president gets it right on reconstructing our trade policy to better protect America’s economic interests and intellectual property rights, he gets it wrong when he rails against U.S. drug companies and calls for “safe” importation of drugs from Canada.  

In the past several days, however, President Trump has offered a strong signal about what he intends to do to bring down the high cost of medicines. The president is challenging our trading partners to open up their markets to America’s biopharmaceutical industry, and his administration is pressing foreign governments to stop threatening to pilfer our intellectual property (IP).

On April 27th, the Office of the United States Trade Representative (USTR) issued its 2018 Special 301 Report, including a new section highlighting barriers to access within the biopharmaceutical market. The report details the myriad obstacles America’s pharmaceutical and biotechnology innovators are forced to confront in countries around the world, including our largest trading partners like Canada and China. These barriers to market and threats to IPR are the key drivers of high costs here in the United States.

The USTR report states:

In order to promote affordable healthcare for Americans and the innovation to preserve access to the cutting-edge cures and therapies, USTR has been engaging with trading partners to ensure that U.S. owners of IP have a full and fair opportunity to use and profit from their IP.

The report also makes clear that the Trump administration is working to “ensure robust IP systems and reduce market access barriers to pharmaceutical products and medical devices.” The goal? To ensure “trading partners contribute their fair share to the research and development of new cures and therapies.”

Perhaps most importantly, the report highlights the administration’s concerns regarding unfair uses of compulsory licenses — i.e., foreign governments stealing patents from America’s biopharmaceutical companies. It’s the threat of compulsory licensing that forces American companies to sell their products at price-controlled levels in foreign markets, again, driving up costs for Americans. The reason why drugs are so cheap in Canada, for instance, is because if an American company refuses to sell its medicine in Canada at the artificially set, government-mandated price, the Canadian government will just take the patent.

When it comes to trade policy, the president has an unusual ally in Chuck Schumer. The Senator’s  remarks on Trump’s trade crackdown on China were quite remarkable given Washington’s current state of hyper-partisanship. Sen. Schumer said:

I don’t agree with President Trump on a whole lot, but today I want to give him a big pat on the back. He is doing the right thing when it comes to China … Unfortunately, previous presidents, Democrat and Republican, just stood by as China did what it did to us. President Trump is exactly right.

President Trump’s resetting of trade policy is the key to making prescriptions in the U.S. more affordable. But legalizing drug importation would be a big mistake.

First, importation would indirectly impose price controls on the U.S. drug market, undermining medical progress and stifling innovation — no new cures. Second, counterfeiting of drugs has exploded over the last 10 years making importing prescription medicines extremely dangerous. America’s opioid crisis is largely driven by drug dealers targeting American patients — particularly those suffering from cancer. There are enormous amounts of counterfeit fentanyl and other imposter medications flooding across our southern border. Importation would only make the crisis worse.

With the USTR’s 2018 Special 301 Report, the Trump administration is showing a bipartisan way forward on drug prices. President Trump is poised to accomplish what both Presidents Bush and Obama failed to do, capturing Washington’s last policy unicorn: a bipartisan agreement to help Americans get greater access to the medicines they need at prices they can afford.

Jerry Rogers is the founder of Capitol Allies. He was a deputy vice president at the Pharmaceutical Research and Manufacturers of America from 2003–2008

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