- - Tuesday, October 1, 2019

In 2012, now-President Donald Trump began negotiations with the federal government to lease and revitalize the Old Post Office on Pennsylvania Avenue in Washington, D.C. His organization pledged to spend $200 million to turn the historic site into a luxury hotel. The two sides struck a deal and the Trump team opened the Trump International Hotel in 2016.

Naysayers love to hate the opulence and high nightly fees, but Mr. Trump — who obviously does not now oversee company operations — and his family business should get to charge whatever the market will bear.

Now, imagine if that was not the case. Imagine the U.S. General Services Administration, when it was trying to ink a lease with the Trumps in 2013, told the family that it could only offer rooms for $50 a night because that is what hotels in Greece and Slovakia charge. 

We know who would have walked away. The Trumps — and every other developer who came after. The building would still be vacant. There still would be a void on a full block in the middle of America’s most-recognized thoroughfare.

Ironically, this fictitious proposal essentially is what the Trump administration has offered to pharmaceutical investors with its International Pricing Index (IPI) regulation. The rule sends the message that, no matter how much money is put into research and development, no matter how many hoped-for treatments never make it to market and no matter how many years a breakthrough takes, a drug — even a cure for Alzheimer’s — is only worth what a few bureaucrats sitting not far from the Trump International Hotel say.

The U.S. Department of Health and Human Services (HHS) offered its IPI outline in October 2018. It would set prices for certain drugs under Medicare Part B based on a benchmark that uses prices in 16 countries, including Greece and Slovakia. The department reportedly sent its final proposal to the White House for review this summer. President Trump is expected to re-pitch the idea to American voters in remarks this month.

He should walk away, just as he would have if the GSA had set in-room dining prices at his hotel.

These price controls will do exactly what that fictitious GSA agreement would have done: Keep companies from investing, and leave a void. 

According to a study by Tufts University, today developing one new cure requires $2.6 billion in research and development. That sum is more than 10 times the president’s promised investment in the Old Post Office. It is more than three times the cost of bringing a drug to market just 16 years ago, in 2003. Remember that statistic the next time someone says drug prices are rising faster than inflation.

The failure rate of drugs in development also is higher. For any given treatment, today there is about a 1-in-10 chance that it will make it to market. The chances were double that a decade ago.

Price controls like the IPI will make it much less likely that researchers and investors will take risks. In a December 2018 letter to the Trump administration, 175 economists argued history has shown price controls lead to shortages. That does not mean that Americans will have to work harder, or travel longer distances, to find the drugs they need.

It will mean a shortage of innovation. Drugs will not just be hard to come by; they will not exist. That outcome is easy to predict, and it is why a 2008 Rand Institute study of drug price controls found they reduce life expectancy over time.

Imagine what this could mean for a disease like Alzheimer’s. Between 1998 and 2018, there were more than 150 failed attempts at developing Alzheimer’s drugs. Is the federal government really going to tell the research team that finds an Alzheimer’s treatment that their cure is only worth so much?

Under the IPI, it will.

Like life-saving medications, the Trump International Hotel on Pennsylvania Avenue took years to realize. The federal and D.C. governments actually had been looking for development offers since the late 1990s, when the building was largely vacant. 

A major project like revitalizing the Old Post Office took an investor with capital, vision and patience.

That patience, vision and capital is why the United States develops more prescription medicine than the rest of the world combined. The president should consider those incentives when he contemplates price controls for prescription drugs.

Rather than impose price controls, President Trump should focus on reforming the Food and Drug Administration’s costly, time-consuming and wasteful drug approval process, which denies Americans access to medicines being successfully used by people in other countries. This will lower precautionary drug prices and increase supply instead of reducing Americans access to drugs, as price controls will do.

• Ron Paul, a former congressman from Texas, is the chairman of Campaign for Liberty. 

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