- - Sunday, February 24, 2019

ANALYSIS/OPINION:

President Donald J. Trump has made it a promise to lower drug prices for all Americans. As a populist, he has hit on a very important issue, because ultimately the manufacturers of drugs own a large percentage of responsibility for high drug prices.

There are a number of reasons why we have high health care costs for services and drugs, including the massive amount of money that the government has sunk into health care and the fact that drugs are one product where consumers seldom know the actual end cost of a drug.

Congress is studying ways to lower drug prices right now. The Senate Finance Committee is holding a hearing on Feb. 26, 2019, titled “Drug Pricing in America: A Prescription for Change, Part II.” This is a follow up to a hearing where testimony was provided that points a finger at the drug companies for high drug prices. Mark Miller, the executive vice president of health care at the Laura and John Arnold Foundation, testified that high drug prices are expected to go even higher in the coming years.

“In 2016, the United States spent $471 billion on prescription drugs. That number is expected to rise by nearly a quarter to $584 billion by 2020. This expenditure must be taken in the larger context of spending in America.” These prices are rising because drug companies are pricing drugs higher than they could with a true free market.

Mr. Miller testified that one problem is government granted monopolies to drug companies that have removed market forces from drug pricing. “A common refrain from the drug industry is that high prices are necessary to drive innovative research and drug development, and that making drugs is hard and risky and America subsidizes research for the rest of the world. In fact, revenues generated just from sales in America would fund 176 percent of the global pharmaceutical research and development budgets for these companies.”



In addition, drug manufacturers are trying to change a rebate rule impacting Medicare Part D and Medicaid managed rules that will remove power from insurance providers and pharmacy benefit managers (PBMs) that will eliminate the only downward pressure on drug prices. The market is not governing prices, because of government policies that interfere with a proper free market.

Some drug manufacturers are blocking competition. As Mr. Miller pointed out, “instead of encouraging research into the next generation of cures, firms with drugs approved by the Food and Drug Administration (FDA) are incentivized to hold on to their monopolies as long as possible and deploy as many anticompetitive tactics as possible to ensure generics or biosimilars are not available.”

This tactic has been used in domestic law and in trade agreements. “Between 2005 and 2015, over 75 percent of drugs associated with new patents were for drugs already on the market. Of the roughly 100 bestselling drugs, nearly 80 percent obtained an additional patent to extend their monopoly period at least once; nearly 50 percent extended it more than once.”

Drug companies had a provision inserted into the new U.S.-Mexico-Canada Agreement (USMCA) that, according to the AP, “give(s) pharmaceutical companies 10 years’ protection from cheaper competition in a category of ultra-expensive drugs called biologics, which are made from living cells.” This provision is controversial, because these drugs are already expensive and a monopoly on the drugs that protects them from “bio-similar” drugs will keep the prices high.

President Trump was right to say in 2017 that drug companies are “getting away with murder” with drug pricing. Politico reported on Oct. 16, 2017, “Trump noted that other countries, unlike the United States, set drug prices and pay less than half of what the United States pays for the same treatments. Trump said he wants to bring U.S. prices down to what other countries are paying, ‘or at least close’ to that amount, and let those countries pay more for drugs.” The president’s instincts are correct and his administration must follow his advice by not using the power of government to protect high drug prices,

Conservatives favor free market-based health care. The hearing this week hopefully will lead to a good faith discussion on the proper amount of blame to be laid on drug manufacturers for excessive drug costs.

• Beau Rothschild, the founder of Rothschild Policy and Politics, formerly served as the members outreach director for the Committee on House Administration.

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