A Second Opinion on Trump’s Drug Proposal

 

President Trump wants Americans to pay less for Medicare Part B drugs. (Trump’s Radical Plan to Lower Medicare Drug Prices) That’s certainly a good thing. But does that come with an unacceptable cost?

The Wall Street Journal editorial board thinks it may. They say prices in Europe are artificially lower because these countries run single-payer healthcare systems that dictate the prices they’re willing to pay. In other words, market forces do not set the price.

They say that Europe pays for these artificially lower prices in the form of reduced access to healthcare. That certainly is typical of single-payer healthcare systems. Of 74 cancer drugs launched between 2011 and 2018, 95% of them (70 drugs) are available in the U.S. But only 74% are available in the U.K., 49% in Japan, and 8% in Greece. People in these countries are paying for lower prices with their lives.

Better quality care in the U.S. is why America outpaces 10 European countries on cancer survival rates. These countries simply are willing to deny people treatment if it saves the government money. This should be remembered the next time Bernie Sanders pushes his single-payer healthcare!

Then there’s the impact on investment in new drugs. The Trump plan is expected to save $17 Billion over five years by establishing price controls based on an international index of prices in sixteen other countries. HHS Secretary Alex Azar says this amount represents a fraction of pharmaceutical research and development. That may be true, but is it a fraction investors are willing to ignore? It’s always easy to spend other people’s money more readily than your own.

WSJ says investors who are considering bankrolling the cure for Alzheimer’s disease are already staring at a very small chance of success. The Trump proposal adds another potential limit on return that will be restricted further if Democrats retake power and use it as a precedent. The rule deals with Medicare Part B, or drugs administered by doctors like specialty drugs, whose development is especially tough.

They say these investors may choose less difficult drug development, for less significant cures, or they may simply choose other investments like the next Uber or other new business model. New drug development can only be sustained by a reasonable chance of a healthy return on investment in R&D.

These are reasonable criticisms that are not new. Pharmaceutical companies have been making these arguments for years to ensure the high drug prices and flow of investment capital they believe they need to sustain their industry. The real question is this:

Is the American consumer willing to pay higher prices for drugs to enable the development of new treatments or are lower prices for currently available drugs more important?

 

How would you answer the question?

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