HHS Drug Price Plan Is a Gift to Global ‘Freeloaders’
Prescription drugs are costly, especially in the United States. That's why, in an effort to lower the prices Americans pay at the pharmacy, President Trump recently pledged to end "the global freeloading that forces American consumers to subsidize lower prices in foreign countries."
Unfortunately, a new plan from the Department of Health and Human Services undermines this goal.
HHS Sec. Alex Azar recently unveiled a new Medicare proposal that simply copies the foreign price-control policies that have enabled other countries to underpay for drugs for so long. Not only does the change fail to hold "freeloading" countries accountable — it will undermine access to life-changing medicines here in the United States.
Why are brand-name drugs cheaper in foreign countries than they are here in the United States? Simply put, it's because of price controls. In countries like the United Kingdom, Canada, France, and Sweden, the government dictates what drug companies can charge for their products.
The prices of prescription drugs sold in Sweden, for instance, are determined by the Pharmaceutical Benefits Board. Canada's Patented Medicine Prices Review Board plays a similar role. So does France's Economic Committee on Health Care Products.
The single-payer healthcare systems in these countries are what make such price controls possible. When the government is the sole administrator of prescription drugs, it has extraordinary bargaining power — enabling it to secure below-market prices from drug companies.
In the end, American patients pick up the tab for these foreign discounts by shouldering much of the burden for global research and development. This is unfair — and something that President Trump is right to condemn.
Unfortunately, HHS' new Medicare proposal does little to rectify the situation. The policy would change what the government pays for drugs under Medicare Part B — a part of the program that covers medicines administered at a doctor's office, such as cancer therapies.
Under HHS' plan, Part B would base its drug payments not on a drug's average domestic price, as the program does now, but on what a list of 16 other countries pay for the same medicine.
In no way does this reform hold countries accountable for their "freeloading" practices. To the contrary, it adopts foreign price controls right here in the United States.
Patients often lose access to the best medicines when their government adopts price controls. Of the drugs launched in the last seven years, only 60 percent were available in Sweden. And only half made it to patients in Canada and France.
Here in the United States, meanwhile, nearly 90 of those medicines were available. Americans will no longer enjoy generous access to the newest drugs if we embrace price controls.
There is a way to hold foreign countries accountable for their pricing policies — instead of just copying them. Doing so will require trade agreements that force these governments to value American pharmaceuticals fairly — and to protect the intellectual property behind these medicines.
The administration made tremendous progress in this direction with the recently-forged United States-Mexico-Canada Agreement (USMCA). That trade pact holds our northern and southern neighbors to rigorous IP and pricing standards when it comes to sophisticated drugs known as biologics.
In the end, patients are the ones who benefit from agreements like the USMCA, as these deals create an environment where medical innovation can flourish.
It costs an estimated $2.6 billion to create just a single new medicine, after all. That investment is only worthwhile if drug companies are confident that they'll have a chance to recoup their upfront costs. Trade pacts that ensure medicines will be fairly valued abroad provide that confidence.
Importing the socialist pricing tactics of foreign governments is no way to stand up for Medicare patients. To stop free-riding foreign governments in their tracks, the Trump administration should explore policies that ensure all patients pay a fair price at the pharmacy counter.
Peter J. Pitts, a former Food and Drug Administration associate commissioner, is president of the Center for Medicine in the Public Interest.