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PINKERTON: Trump Lays Down the Law to Big Pharma, Embraces the Cure Strategy

Fourth in a series…

President Donald Trump made big news on January 31, when he met in the White House with top pharmaceutical company executives.  Or at least he deserved to make big news, because the issues he raised in the West Wing’s Roosevelt Room will prove to be central to the health, and wealth, of every American.

 

And yet as we know, there’s a lot else going on: first, the continuing fight over immigration and refugees; second, the battle over Cabinet confirmations; and now, third, the looming mega-battle over the nomination of Judge Neil Gorsuch for the Supreme Court.

Still, over time, Trump’s emerging healthcare vision will likely be seen for what it bids to be: a major breakthrough in how the country thinks about healthcare, and a major breakthrough for actual health.  

The basic thrust of Trump’s idea can be stated simply: Health insurance is important, but health itself is more important.  In other words, as vital as health insurance might be—including the battle over Obamacare—the reality is that health insurance of any kind is only as good as the treatment system backstopping it.  Or, to put it another way, if the cure or treatment for what ails the patient doesn’t exist, then all the insurance in the world won’t do him or her any good.  Without the right therapy or antidote, a health-insurance card is just a piece of plastic.  Thus we can see: In the crunch of a medical crisis, it’s usually the science, not the finance, that spells the difference between life and death.  

Of course, none of this argues that health insurance is not important—or not worth major efforts toward reform.  And so what might be called the “first front” of Trump’s healthcare agenda is the full repeal-and-replace of Obamacare.  After all, at the moment, the distortions of Obamacare threaten to distort the entire health insurance market.  It’s little wonder, then, that the battle over Obamacare, pro and con, has filled the news for nearly a decade; it will, no doubt, continue to receive enormous coverage.  In fact, the first three parts of this series dealt with, yes, Obamacare: here, here, and here.  

Okay, so now let’s turn to the “second front” of the nascent Trump healthcare policy.  Perhaps it will continue to receive less media attention than the first front, and yet this author believes it will ultimately prove to be more consequential. 

We can call this second front the Cure Strategy—the Trump Cure Strategy.  As I have argued here at Breitbart in the past, Trump’s oft-articulated idea of curing disease is the obvious optimum solution to many of the challenges of healthcare.  

After all, less disease means longer lives, longer careers, and more economic activity, not to mention fewer trips to the doctor or hospital.  The polio vaccine, for example, cut the cost of polio by nearly 100 percent, to say nothing of the humanitarian gain.  And the simple expedient of taking folic acid—found in most multivitamins—can virtually eliminate the risk that women face of having children born with anencephaly and spinal bifida.  

Meanwhile, improved treatments for such dread diseases as AIDS, Ebola, and Zika have saved millions of lives and billions, even trillions, of dollars.  So why not have more of that?  Why not turn that sort of virtuous medical life-saving—and, at the same time, as a happy byproduct, cost-cutting—into a sustained national policy?  

Indeed, Trump’s Cure Strategy could be not only a boon for America, it’s also a boon for the world.  As the 45th president said in his January 20 inaugural address, American ingenuity stands ready “to free the Earth from the miseries of disease.” 

Of course, the hard part is actually getting it done.  And the Commander-in-Chief is ready to roll up his sleeves.  To that end, on Tuesday morning, speaking to those “pharma” chieftains, the President made six basic points about medicines and cures: 

First, the prices of existing medical drugs are too high.

Second, other countries have been freeloading on Uncle Sam. 

Third, the best way to reduce prices is to expand supply.

Fourth, the best way to to expand supply is to cut taxes and deregulate. 

Fifth, more drug production ought to occur inside the United States. 

Sixth, the single best way to improve health is by developing new medical cures. 

So now, let’s look at each of these six points in turn:

1) Prices are too high.  As the President said on Tuesday, “US drug companies have produced extraordinary results for our country, but the prices have been astronomical. . . . We have to get the prices down.”  In the Roosevelt Room, hearing this message in person, were the CEOs of Amgen, Johnson & Johnson, Eli Lilly, Merck, and Novartis, as well as the chief of the trade group PhRMA.

Trump has a good point about high drug prices.  We all remember the egregious case of Martin Shkreli, the hedge-funder who in 2015 made himself CEO of Turing Pharmaceuticals and immediately raised the price of a key anti-bacterial drug, Daraprim, from $13.50 a dose to $750 a dose.  As Shkreli chortled in a celebratory e-mail:

We raised the price from $1,700 per bottle to $75,000 … So 5,000 paying bottles at the new price is $375,000,000—almost all of it is profit and I think we will get 3 years of that or more.  Should be a very handsome investment for all of us. . . . $1 bn. here we come.

And it’s not just Shkreli and Turing; similar instances of extreme price-gouging, just within the last year, have been seen in the pharma companies Mylan and Valeant.  To be sure, compared to the industry as a whole, those smaller companies stand as obnoxious outliers.  However, according to an August 2016 article in the Journal of the American Medical Association, the problem of high prices is, indeed, systemic: 

Per capita prescription drug spending in the United States exceeds that in all other countries, largely driven by brand-name drug prices that have been increasing in recent years at rates far beyond the consumer price index.  In 2013, per capita spending on prescription drugs was $858 compared with an average of $400 for 19 other industrialized nations.

The point here is not to make any kind of blunderbuss critique of capitalism; instead it’s to suggest, as Trump has done, that there must be some reasonable accommodation to the national interest—a golden mean.  That is, producers should to be able to make a profit, but they don’t need excessive profits.  And for their part, consumers might wish for the lowest possible prices, but as a practical matter, they should settle for fair prices.  It’s out of such compromises that social harmony, as well as continued private-sector-driven medical advancement, is achieved.  

And that process of societal accommodation might begin with a fair-minded negotiation of drug prices.  Today, Uncle Sam accounts for more than a quarter of all US prescription-drug spending, which totals more than $263 billion.  One might think that with all that money to spend, the feds would have some real bargaining power.  And yet by law, the government cannot, in almost all cases, bargain for volume discounts.  It was  drug-company lobbyists, of course, who helped write the laws that prevent such bargaining.  

Trump has talked about this costly conundrum for years.  As he said during his January 11 press conference, the pharma companies have been “getting away with murder.” Ouch!  

In person with the pharma executives, Trump took a softer tone, but he was no less insistent on his basic point: “Competition [is] the key to lower drug prices. We have competition, but a lot of times, the competition dissipates.”  He added, “We can increase competition and bidding wars, big time.”

For their part, the pharma leaders were on their best behavior; no doubt they were 

relieved that they weren’t getting the full Trump arm-twisting treatment, as have other CEOs.  

In the conciliatory words of Eli Lilly’s Dave Ricks after the meeting, “We all understand the concern he’s raising.” And Stephen J. Ubl, CEO of PhRMA, tweeted out:

We take drug pricing concerns seriously, want to work w/ @POTUS, Congress on mkt-based reforms to impr access to & affordability of meds 

Okay, so that’s plenty of progress on the pricing issue—for one day.  It’s a safe bet that from now on, no pharma company, big or small, will dare to risk Trump’s wrath through excessive profiteering.  Good! 

2) Other countries have been freeloading.  Per that Journal of the American Medical Association article, the one which showed that Americans spend more than twice as much per capita on drugs as other industrialized nations, we can see a simple reason why: Most of those other countries have strict price controls on drugs.  The result of such price controls, of course, has been to squelch innovation, and that’s exactly what has happened.  And yet for decades now, foreign countries have had an ace in the hole: The US, which does not have price controls, has continued to innovate, and US drug companies have charged high prices within the domestic market as a result.  

In fact, it’s hard to blame them for charging high, because their costs are  high: According to the Tufts Center for the Study of Drug Development, the cost of bringing a single new drug to market is $2.6 billion.  And that cost, Tufts notes, has risen 145 percent over the previous decade.  Why these huge costs?  A lot of the problem is the sheer complexity of making a new drug, plus, of course, the government-imposed burdens of taxes and regulation—more on that later.  

Yet in the meantime, American pharma companies know that their main chance to recoup their investment is in the US market, and so that’s what they seek to do—hence the high prices for Americans.  Meanwhile, if other countries insist on price controls on the same drugs, well, the US pharma companies just suck it up and sell overseas at the lower price, figuring that they’ll make what they can.   Thus pricing becomes two-tier: high for Americans, low for everyone else.  

This chain of causation makes a certain sense for an American pharma company, and yet if we step back a moment, we can see that US drug consumers are, in effect, subsidizing foreign drug-consumers.  And that’s the bad deal for America that Trump is wise to.  As he said on Tuesday, “Our trade policy will prioritize that foreign countries pay their fair share for US-manufactured drugs.”  And in the same meeting, he also said:

We’re going to be ending global freeloading.  Foreign price controls reduce the resources of American drug companies to finance drug and R&D innovation.  I think you people know very well, it’s very unfair to this country.

In other words, just as domestic companies are on notice, so, too, are foreign countries.  The days of their sweetheart deal are over. 

3) Expand supply.  It only makes sense that part of the solution to the crisis of drug-production is to expand the supply: new ideas, new drugs, new competition, new cures.

And yet over the last two decades, the “pipeline” for new medications has been drying up.  In the 1990s, it was routine for the FDA to approve 40 or even 50 new drugs a year; yet in 2016, the FDA approved just 21 new drugs.  Indeed, the peak year for FDA drug approvals was way back in 1996.

And it’s not just the number of new approvals that’s a problem, it’s also the nature  of those approvals.  In the words of Joseph V. Gulfo, executive director of the Lewis Center for Healthcare Innovation and Technology at Fairleigh Dickinson University: 

Cardiovascular disease remains the number cause of death in the United States, yet, not one drug to treat primary cardiovascular disease was approved in 2016.  Similarly, there were no drugs approved to treat obesity or Alzheimer’s disease, and just one for diabetes.  These are conditions that are afflicting Americans in epidemic proportions and which cause tremendous morbidity (sickness) and mortality (death).

As an aside, we can see, once again, the value of a strategy—a strategy that prioritizes needed categories of cures. 

Speaking broadly to these concerns, Trump said on Tuesday, “I’ll oppose anything that makes it harder for smaller, younger companies to take the risk of bringing their product to a vibrantly competitive market.”  Trump thus hit the nail on the head: What we need can be summed up in one word: More

4) Cut taxes and deregulate.  Everyone knows that Trump’s goal is to turbocharge the US economy, after all these years of disappointingly slow growth.  Such turbocharging will be based mostly on tax cuts and deregulation for the economy as a whole, and yet, of course, the subset that is the pharma industry will benefit as well.  

Yet at the same time, we must observe that the pharmaceutical industry, closely regulated and scrutinized as it is, has special concerns.  And on Tuesday, Trump addressed those, too.  Even as he pledged to maintain safety standards, he pledged that his administration would be “focused on accelerating FDA approvals. . . . We’re going to get the approval process much faster.”  Indeed, in the meeting, Trump pledged to reduce current FDA regulations by “75 percent to 80 percent,” adding of the FDA’s rulebook, “Instead of it being 9,000 pages, it’ll be 100 pages.”  That goal might strike some as aspirational, and yet, as the President said to the executives:

We’re also going to be streamlining the process, so that from your standpoint, when you have a drug, you can actually get it approved, instead of waiting for many, many years.

Can Trump do all of this?  We’ll have to see, of course, and yet he seems to have his “dream team” in mind.  Without naming a name, he teased his future choice for the key job of FDA Commissioner: 

We have a fantastic person that I think I we’ll be naming fairly soon, he’s going to streamline the FDA and you’re going to get your products either approved or not approved, but it’s going to be a quick process.

Surely the pharma execs were thrilled to hear of this, just as American patients will be thrilled to know that more beneficial drugs could soon be flowing through the regulatory pipeline.

5) More drug production ought to be inside the United States.  If Trump stands for anything, he stands for more domestic manufacturing, keeping the jobs and profits here at home.  And that nationalistic stance embraces American drug-manufacturing.  As Trump said to the pharma chiefs:

We have to get even better innovation, and I want you to move your companies back to the United States.  I want you to manufacture in the United States.

In fact, the US is still the world’s largest drug producer, although the trade trend-lines are ominous; today, medical drugs worth $86 billion come from overseas.  That import total, we might note, is nearly double the total of US exports.  

(The biggest exporter to the US, we might add, is Ireland, which has set itself up as an international tax-shelter, leading many US companies, including drug makers, to relocate there.  We can only hope that Trump’s policies, involving both carrots and sticks, will put a stop to this flight.) 

As Trump said to the executives:

Our trade policy will prioritize that foreign countries pay their fair share for US manufactured drugs, so [that] our drug companies have greater financial resources to accelerate the development of new cures.

And once again, the industry was receptive.  As White House Press Secretary Sean Spicer tweeted later:

In meeting with Pharma companies @Amgen CEO tells @POTUS they are adding 1600 jobs 

And in another tweet, PhARMA’s Ubl declared the enthusiastic assent of the whole group: 

We believe @POTUS agenda on taxes, trade & regulations could create 350,000 American jobs over 10 years due to biopharma industry growth. 

‘Nuff said on that. 

6) Develop new medical cures.  Once again on Tuesday, Trump showed awareness of the deep value of cures, and of a Cure Strategy.   As he said, “New drugs have led to longer, healthier lives—we all know that—but we have to do better accelerating cures.” 

Indeed, later on, Trump reiterated the point about cures in a Facebook post

Our drug companies [must] have greater financial resources to accelerate development of new cures…..I think that’s so important!

We can add that Trump closed his post with a display of the “Can Do” attitude that was once common in American leaders, but now seems rare.  As he said:

In order to MAKE AMERICA GREAT AGAIN — we all need to work together right here in the United States of America.

Thus we can see the emerging Trump Cure Strategy.   As we have observed, the fight to repeal and replace Obamacare will continue, and yet, now, the second front has been opened.  And in the opening of that second front, we can see a philosophy that is simultaneously pro-consumer, pro-business, and pro-patient.  That is, it’s a win-win-win for America.  

It’s hard to do any better than that.

Next: A closer look at pharma drug production—and prices. 

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