Uppers and downers of reform

Lots of bark, little bite. US President Donald Trump’s harsh rhetoric about the cost of prescription drugs is unlikely to be matched by equally ferocious action. After Trump announced what he described as the “most sweeping action in history” to lower prices in early May, shares in affected pharmaceutical companies outperformed the wider market.

This is because the plan stopped short of adopting policies the industry fears most. True, it might improve competition and transparency. Possible changes to Medicare, the federal health insurance, could put pressure on prices. Roche and Bristol-Myers Squibb might be most at risk, Credit Suisse thinks. Even so, the US will still have some of the world’s highest drug prices.

Researchers calculate that US patients account for more than three-quarters of worldwide pharmaceutical profits. American patients use newer drugs and face steeper costs than patients elsewhere.

The industry is keen to defend itself, spending twice as much on lobbyists as any other sector.

Pharma’s argument is high prices are needed to recoup investment in cutting-edge innovation. That carries force — although cost-cutting might often be better targeted at fat marketing budgets than at research and development.

The argument is only persuasive while innovation delivers results. The trend for rival companies to chase the same high-margin markets makes that harder. If results disappoint, legislators may decide the yield from research spending no longer justifies high drug prices. May 28