Government Creates the High Drug Costs It Then Seeks to Fix

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The following article is sponsored by Americans for Limited Government and authored by Richard Manning.

$2.6 billion!  That’s how much Tuft’s University research says it costs to bring a new drug from the research lab to the pharmacy counter.

As President Trump wrestles with trying to rein in the high cost of medicine in the United States, he is contemplating an executive order and a proposed rule from the Center for Medicare & Medicaid Services that would set Medicare Part B prescription drug costs based on an International Pricing Index (IPI). The problem is that the IPI includes countries that utilize socialized medicine and artificial price controls. Here, President Trump is mistakenly focused upon the symptom rather than the cause of the problem.  The symptom is the cost, the cause is the incredible barriers to approval and pernicious middle-men known as Pharmacy Benefit Managers which make medicines more expensive.

The president is also mistaken in using foreign socialized medicine countries to determine U.S. drug prices. Besides the point that this runs counter to the America First DNA which courses through President Trump veins, a recent statement by the National Council on Disabilities argues against using the IPI for setting US drug prices as it “relies on quality-adjusted life years (QALYS) – a formula used to assess the value of medications by assigning a lower value to the life of a person with an illness or disability.”

The truth is outsourcing medicine pricing to foreign countries does violence to the American value that markets determine prices instead of bureaucrats. Rather than bemoaning that foreign price controls rip off American consumers by creating artificially low prices abroad which get made up by higher prices here at home, the president should demand that these countries open up their pricing models so that the costs of creating a cure for Alzheimer’s or cancer are borne fairly.

Because the real victims of foreign price controls are those whose hope lies in medical breakthroughs. Whether it be for treatments and cures for the Chinese-originated virus, finding ways to slow or end crippling degenerative diseases like Lou Gehrig’s Disease or Multiple Sclerosis or for the development of innovative biologic treatments which are becoming prevalent in treating and beating previously untreatable cancers, it is time to confront those foreign nations who are ripping us off, rather than emulating them.

Beyond jaw-boning countries with socialized medicine to quit free-riding on new medicine development, the president can take two actions which would have an immediate impact.

He took an initial step in reining in drug middlemen through his Executive Order on Pharmacy Benefit Managers (PBM) who pocket rebates intended for the customers, driving prices up. However this can be taken further by forcing the federal PBM contract(s) to be re-competed with the winners being those who pass substantial rebate savings on to the consumer.

Another step that the president can take today is to apply the same streamlined standards that the FDA enacted in 1987 for medicines to treat AIDS to all medicines under FDA review. AIDS has gone from a death sentence to something patients can live with, and the expedited approval standards have encouraged research and development of these life-saving treatments.  To lower prices today and in the future, the president should immediately replace his socialist country price control Executive Order with an Order which expands the AIDS approval process to include all medicines and tests.

It is beyond obvious that cutting the cost and time of bringing innovative treatments and cures to market generates more, diverse treatment choices for doctors and patients.  And we all know that choice creates competition which drives down price.

The lessons learned about the irrational roadblocks identified in the federal government approval process during the COVID-19 fight should also inform President Trump that costs and as a result, prices can be cut through systemic reforms at the FDA and elsewhere.

America has the greatest inventors in the world, by changing the rules of the FDA approval process and safely streamlining that approval process, more capital would flow to drug development creating more treatments in a shorter time frame at a lower cost to the consumer.  The classic, win, win, win that this president is famous for creating as he works his art of the deal magic.

Rick Manning is the president of Americans for Limited Government.

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