OPINION:
The Trump administration is right to explore strategies to improve the U.S. health care system. A prime example is executive action to foster price transparency among hospitals and insurance companies, making it easier for Americans to shop around for the best health care deals. However, not all ideas are winners, and one drug pricing proposal being floated in the Trump orbit is a dud.
The America First Policy Institute published a report in March that gives insight into what the White House could be considering. The author rightly calls out European Union member states and Canada for applying strict government price controls on prescription drugs and argues that Americans are paying higher prices because of it. What’s the proposed fix? Import European-style government price controls into the U.S.
Sen. Bernard Sanders supports similar ideas and is cheering from the proverbial sidelines.
Specifically, the policy would peg the cost of Medicare Part B drugs, or medications typically administered in a clinical setting, to a percentage of what other countries such as Britain, France or Germany pay. Oddly, proponents argue that the proposal will squeeze the Europeans into lifting their socialist government price ceilings. Still, it’s unclear how adopting similarly misguided practices in America would improve the situation without official government-to-government negotiations.
American taxpayers cover more research and development projects for new drugs than their counterparts worldwide, but the proposed cure would be worse than the European “freeloading” disease.
Americans have access to the world’s most innovative library of medicines, while access in Britain, for example, lags. Cloning European price controls would erase that advantage, leaving U.S. patients who need cutting-edge medicines vulnerable.
The process of developing a medicine is highly capital-intensive. Bringing a new drug to market is estimated to cost more than $2 billion and can take more than a decade. If government price controls handicap the opportunity to recoup these huge investments, fewer lifesaving treatments, therapies and vaccines will come to market.
Americans are already seeing the chilling effect on patient choice from a drug price control scheme enacted by Democrats under the Biden administration. Under the sorely misnamed Inflation Reduction Act, many drugs accessed through Medicare Part D are subject to government price setting.
As reported by the Incubate Coalition, 44 research programs have been halted, and more than 23 drugs have been discontinued since Mr. Biden signed the bill into law. Examples include medications to treat psychiatric disorders and type 2 diabetes, as well as initiatives to develop new oncology therapies. Following through with importing Europe’s pricing policy disaster would accelerate the backward slide.
Beyond the Economics 101 fallout of manipulating the free market, the price controls would undermine other Trump administration priorities, chiefly encouraging more American manufacturing. Slashing drugmaker revenue by, as the America First Policy Institute estimates, billions of dollars will make it more economically unfeasible for companies to invest further in Ohio, North Carolina or nearby territories such as Puerto Rico.
It’s encouraging to see the Trump administration exploring strategies to make health care more affordable in America, but doubling down on harmful Democratic policies such as price controls is not the answer. The White House should flag the idea as a nonstarter in favor of measures that foster transparency, choice and competition in the health care system.
• Jamey Bowers is a partner and owner at Berman and Co.
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