Trump Administration Scores a Win for Prescription Drug Consumers
Health insurance costs in the United States have unfortunately continued to rise due to the Affordable Care Act, or Obamacare, and will continue to do so.
However, there are still steps we can take to lower drug prices and make medicine more affordable.
Thankfully, the Trump administration has taken a major positive step in that direction by taking action in the area of price transparency in medicine.
As part of Health and Human Services’ continued efforts to increase patient options and lower prescription drug prices, the Centers for Medicare & Medicaid Services proposed a rule that would require prescription drug manufacturers to post the Wholesale Acquisition Cost (WAC) for drugs covered under Medicare and Medicaid in direct-to-consumer television advertisements.
This would be an outstanding development.
Lack of transparency is a contributing factor in the high cost of prescription drugs so anything that can be done to increase transparency would be a welcome change.
According to a press release from the Centers for Medicare & Medicaid Services: “This historic proposal is an important way to create new incentives for drug companies to start lowering their list prices, rather than raising them,’ said HHS Secretary Alex Azar. ‘President Trump’s drug-pricing blueprint called for HHS to consider how to accomplish this goal, and now we are following through on this measure to better inform patients, help them lower their drug costs, and reduce unreasonable spending in Medicare and Medicaid.’”
This is would be an outstanding move forward, but there are still many steps that need to be taken to bring down prescription drug prices more broadly.
Patent reform would also go a long way towards bringing down the cost of most prescription drugs.
The average drug in this country costs anywhere from a several hundred million to a few billion dollars to develop. Obviously, it is important that drug companies be allowed to patent the drugs they cultivate, because otherwise, there would be minimal financial incentive to bring those drugs to market.
The patent period lasts for 20 years, but that starts from the time the drug is invented, not the time it reaches market. The average drug takes 8 years to come to market, meaning that in most cases, the developer of the drug has 12 years before they can face any competition.
While I understand that a significant period of time should be afforded to these companies so they can recoup their research and development costs, shaving a few years off of that could be very beneficial to consumers. The earlier availability of generic drugs would lower overall drug costs, especially for those who pay for their medicine out of pocket.
We also need to answer why we are subsidizing drug costs for much of the rest of the developed world.
The United States accounts for nearly 50% of R/D funding, yet the same drugs that cost so much in the United States are often close to 50% cheaper in other countries.
How can this be?
Basically, our country does not have tight price controls on these drugs, while others do. The result is that whatever costs drug companies cannot recoup from the countries with strict price controls gets dumped onto us, making our drugs much more expensive.
Many have suggested that a solution to this would be to adopt the same price control measures here, but that would mean the drug companies would have nowhere to recover their costs and it would lead to less innovation and fewer new drugs in the market since opportunities to make money would be far more scarce.
One interesting idea to combat this is to allow for the re-importation of drugs from Canada, where they are generally far cheaper than in the United States.
While this idea failed to pass in the Senate recently, it has created a very interesting alliance between progressive Senators like Vermont’s Bernie Sanders and Massachusetts’ Elizabeth Warren and libertarian-leaning Republicans like Kentucky’s Rand Paul and Arizona’s Jeff Flake.
Some have said this practice should not be allowed because there is potential for fraud and it would mean bypassing the FDA. Those are reasonable arguments and should not be dismissed out of hand.
However, it is worth considering the potential ramifications for Canada.
This practice would likely result in a Canadian drug shortage, which would mean they would be forced to raise prices somewhat and pay something closer to the true market share that they should have been paying for drugs all along.
And whether or not that re-importation bill is how we do it, getting other countries to pay their true market share for drugs so that drug companies don’t lean so heavily on us is a must if we are ever going to get fair pricing in the United States.
HHS has done something great here, but it should only be the beginning.
There is a long road ahead as far as fixing the cost of prescription drugs in the United States, but based on this action and previous ones, I am confident we have the right administration in place to carry out the changes that are so badly needed.