Trump and Biden Are Wrong: Top-down Health Care Doesn’t Work
President Donald Trump has finally revealed his most favored nation drug price control plan – and it’s a real humdinger. It is full of government goodies and it pegs drug prices to OECD nations with similar per-capita GDP as the U.S. It may just help him win re-election…at the cost of innovation and patient access to drugs.
Health care price ceilings have obvious problems, like the rationing seen in Great Britain’s health care system or the 1999 Boston Consulting Group findings that drug price controls in several European nations dramatically slowed drug development. Contrast that with the U.S., which the Milken Institute found developed and produced nearly 60 percent of the world’s new medicines between 2001 and 2010.
Unfortunately, Trump and Joseph Biden want to jump on the price control bandwagon when we need all the resources available to develop and bring a safe, effective COVID-19 vaccine to market. Biden’s drug price controls would limit price increases to inflation, which like Trump’s Executive Order are bound to sell well with many voters and political elitists alike even as they reduce patient access to life-saving drugs in the midst of the worst pandemic in a century.
Trump and Biden should ditch price controls and follow the insights of the administration’s Council of Economic Advisors. In 2018, the Council recommended reforming the federal drug approval process to reduce the time it takes to get a drug to market without sacrificing effective oversight. The CEA also drove home the reality that the vast majority of pharmaceutical profits derived from patented drugs come from the United States. Nations with price controls are a net loss for drug innovators and developers, which creates even more impactful losses for people who need critical drugs.
The CEA is not alone in recommending free market solutions to drive down drug costs. The Food & Drug Administration (FDA) reported last year that the more generic drugs that are on the market, the cheaper a brand drug alternative becomes. Looking from 2015 to 2017, the FDA found that the first generic drug is typically 39 percent cheaper than a brand alternative. Two competitors bring prices down 54 percent from the original brand price, and four competitors bring prices down 79 percent. Once six generic competitors are competing for consumer dollars, price reductions reach as much as 95 percent below brand prices.
The CEA’s report and the FDA’s discoveries are consistent with the simple principle that government should stick to oversight and reasonable regulation – not interference with the patient-provider relationship by restricting access to drugs. It doesn’t sell as well on the campaign trail, but creating opportunities for private-sector innovation brings better results for real people. This is why in August the Department of Health & Human Services removed a series of unnecessary lab test bureaucracies which stood between Americans and development of a safe, effective coronavirus vaccine.
At the GOP Convention, Trump’s daughter Ivanka bragged about opposition to Trump’s price control plan – but that opposition is fundamentally correct. Trump should rely on a partnership with the private sector, with government and business acting in their proper roles, not interference. He’ll still upset some people, but more importantly he’ll be using the right tools for the job of lowering drug prices and increasing patient access.
Dr. Kenneth Schell is a licensed pharmacist who has worked in healthcare for 35 years. He is a former President of the California Board of Pharmacy and a former President of the California State Pharmacy Society.
