OPINION:
President Trump is reshaping the global pharmaceutical market and proving his critics wrong in the process. He recently announced landmark agreements with AstraZeneca, Pfizer, Lilly and Novo Nordisk, which pledged to guarantee America the lowest prices of any developed nation for all newly launched medicines.
These deals, and others that could be announced soon, represent a seismic change in the global drug market.
For decades, foreign countries have used various tactics to bully American companies into selling their medicines for pennies on the dollar. Individual companies, even Big Pharma firms with billions of dollars in annual revenue, had little choice but to accept lowball, take-it-or-leave-it reimbursement offers from vastly more powerful nation-states.
Politicians in both parties long complained about this foreign free-riding, which disproportionately shifts the burden of paying for drug research and development onto Americans. That was all they did: complain. None took any real action until last year, when Mr. Trump issued an executive order promising his administration would “take all necessary” action to prevent foreign countries from ripping off American biotech firms and their workers.
Many of the president’s critics doubted anything would come from the order. The recent announcements prove them wrong and show that companies believe the White House will back them up in their future negotiations with foreign health care systems, which will undoubtedly balk at the demand that they start paying American prices for American medicines.
Of course, the administration’s trade negotiators will need to remain vigilant for all the ways foreign health care systems will try to weasel out of paying market prices. Many of those health care systems, especially in the European Union and Britain, demand various retroactive mandatory rebates and revenue clawbacks that drive prices far below agreed levels.
In other words, even if foreign health care systems nominally agree to pay American prices, that doesn’t mean they actually will once all is said and done, unless U.S. trade negotiators secure binding commitments from trading partners and make it clear that backsliding will be punished.
Similarly, foreign health care systems frequently use inherently biased “health technology assessments” to justify setting ludicrously low prices on new medicines. Britain, for instance, had not updated its cost-effectiveness threshold for these assessments in a quarter century, despite considerable inflation since then — until now, when British negotiators submitted to the Trump administration’s demands that they raise that threshold by 25%.
Last year, Mr. Trump successfully negotiated with our allies to raise NATO defense spending targets based on the size of each country’s economy. He could similarly force other wealthy nations to drop their demands for rebates and clawbacks and genuinely accept market prices for medicines so they spend the same share of their per-capita gross domestic product on new medicines that America spends.
Just as Rome wasn’t built in a day, the imbalance in global drug prices won’t be leveled overnight. Still, as the recent announcements from AstraZeneca, Pfizer, Lilly and Novo Nordisk — and Britain’s pricing concessions — demonstrate, Mr. Trump is making real progress where his predecessors failed.
By keeping up the pressure on foreign governments, the White House can reform the global drug market so it works for U.S. patients and innovators.
• Ambassador Jeffrey Gerrish served as the deputy U.S. trade representative for Asia, Europe, the Middle East and industrial competitiveness from 2018 to 2020.
Please read our comment policy before commenting.