Limit drug prices? Not under ‘blueprint’
Senators will have an opportunity Tuesday to grill Health and Human Services Secretary Alex Azar on President Trump’s “blueprint” for lowering drug prices. It would be nice if something substantial came out of the discussion.
But don’t hold your breath.
Trump’s blueprint, like the pirate’s code, is more what you’d call guidelines.
And even then, it’s debatable how serious he is about going after one of the country’s most politically powerful industries.
Sen. Ron Wyden of Oregon, the ranking Democrat on the Senate Finance Committee, told me he’ll push Azar to flesh out some of the ideas in the blueprint. The fact that drug companies’ stocks went up after Trump’s plan was unveiled in May, he said, indicates how untroubled the industry is about a possible crackdown.
“That was the tell,” Wyden said. “They don’t think much is going to change.” He said he’ll try to get Azar to commit to greater transparency in drug pricing.
“Thus far,” Wyden said, “there is a very, very substantial gap between what the administration says it’s going to do and what it’s really doing.”
Trump has been talking a good game on drug prices since the campaign trail. He repeatedly has declared his intention to go after greedy pharmaceutical firms and take steps to lower prices to reasonable levels.
“One of my greatest priorities is to reduce the price of prescription drugs,” Trump said in his State of the Union speech in January. “I have directed my
administration to make fixing the injustice of high drug prices one of our top priorities. Prices will come down.”
His 39-page blueprint, which Trump called “the most sweeping action in history to lower the price of prescription drugs for the American people,” is long on ambition but short on specifics. It commits the administration only to studying various ideas.
For example, Trump says officials will examine the feasibility of allowing different Medicare plans to pay different prices for drugs.
But it won’t allow the Medicare system as a whole to negotiate on behalf of its more than 55 million beneficiaries, which is a key way that state-run insurance plans abroad keep drug prices in check. Republican lawmakers consistently have blocked such a move.
Peter Hilsenrath, a healthcare economist at University of the Pacific, told me that “a larger and more assertive role for the public sector has worked fairly well in other developed countries.”
He said an even more aggressive approach would be for Medicare and Medicaid to join with private insurers in haggling together with drug companies.
“A single-payer system, or all-payer system, that accounted for all or at least most consumption would have even more market power and would be expected to obtain even more favorable prices for consumers,” Hilsenrath said.
Speaking of long shots, Trump’s blueprint calls for other countries to pay more for drugs, sort of like having Mexico pay for America’s border security. In this case, though, the administration foresees drug companies earning more money abroad and using that cash to lower U.S. prices.
File that under “Sure, you bet.”
At Tuesday’s Senate hearing, expect Azar to parrot Trump’s claims that a sweeping, historic revolution is underway. But don’t expect him to announce anything revolutionary.
Azar appeared recently before the Senate Health, Education, Labor and Pensions Committee. He was asked point-blank by Democratic lawmakers why we don’t do what other developed nations do — exploit the public sector’s bargaining power and set reasonable limits on how much drug companies can charge.
Azar, a former drug company executive, called such moves “superficially appealing.”
“But I don’t know that it really would work, and we might end up paying more for the drugs,” he said, making clear whose interests he was defending (not ours).
No one at the Department of Health and Human Services responded to my request for further comment.
An active governmental hand in drug pricing isn’t “superficially appealing.” It’s a proven method of preventing a money-grubbing industry from gouging the most vulnerable members of society.
That doesn’t mean pharmaceutical companies should be denied fair profits — no one is arguing for that.
The only question is whether it’s a sign of an efficient, robust marketplace when the price of lifesaving Epi-Pens, say, go up by nearly 500% for no better reason than because there was nothing to stop the patent holder from doing it.
Such price hikes aren’t seen in other developed countries for the simple reason that their pharmaceutical regulators won’t allow it.
U.S. drug companies don’t lose money abroad. They just don’t reach as deep into the pockets of the sick.
In January, Azar was asked by Wyden if he ever lowered the price of a prescription drug when he served as head of U.S. operations for Indianapolis drugmaker Eli Lilly & Co.
“Drug prices are too high,” Azar replied.
“That is not the question,” Wyden countered. “Did you ever lower the price?”
Then came a brief moment of clarity in which Azar told a Big Truth: “I don’t know that there is any drug price of a branded product that has ever gone down from any company on any drug in the United States.”
Not one. Ever.
There’s your “free market” in action. TVs get cheaper over time. Computers get cheaper over time. Prescription medications just get more expensive, even as increased demand, amortized research and development costs, and economies of scale should be moving prices in the other direction.
And don’t get taken by the smokescreen that price controls on drugs would stifle medical innovation.
As I noted the other day, the researchers who discovered insulin in 1921 sold the patent to their university for $1 each. The university in turn made it available to drug companies royaltyfree.
Jonas Salk discovered a vaccine for polio in 1953 but never patented it, making it accessible to all.
My point is that medical discovery doesn’t have be guided by greed. Researchers will continue seeking breakthroughs. And drug companies will continue profiting from their advances. But the pursuit of obscene riches doesn’t have to be the defining trait of the pharmaceutical industry.
That’s a blueprint we could build on.
But don’t expect Trump or Azar to say anything so sweeping or historic.