Trump pushes drugmakers for lower prices, more U.S. production
. . . through a two part program, first we need to streamline the drug distribution system, and second we need to force the rest of the advanced nations to pay their fair share.
"U.S. President Donald Trump on Tuesday met with top executives from some of the biggest drugmakers, calling on them to boost U.S. production and lower prices, while he also promised to speed up approval times for new medicines.
Trump reiterated that the government was paying too much for medicines in its health programs for older, disabled and poor people and said he would soon appoint a new U.S. Food and Drug Administration leader.
At the same time, the meeting between Trump and the pharmaceutical executives signaled a defusing of tensions between the two that have kept drug stocks in check since the presidential election. Shares of most of the group rallied Tuesday following the meeting, even as the broader stock market slid.
High drug prices have become a national issue during the past two years as healthcare costs rise. Pharmaceutical stocks have seesawed since Trump was elected, rising on hopes that he would not enact changes and more recently falling on comments about what actions he might take to lower their prices.
“Trump is a populist above all else, and having these (drug) prices skyrocket, he’s commented that under his administration, this is not going to happen,” said market strategist Quincy Krosby of Prudential Financial in Newark, New Jersey.
She said Trump was playing a balancing act between controlling prices and loosening regulations. "I don’t think the majority of Americans want all regulations lifted from drug makers.'"
This is likely true, and even more likely due to the false belief that government regulations actually saves lives, and protects the people from harm. There is little evidence it does this, and much evidence that it hurts both through its active regulatory failures, and its inactive, and long regulatory delays in approval of efficacious drug.
Part one of the program is to streamline the drug distribution, and rebates system. This article addresses this damaging and costly system:
Why drug makers charge outrageous prices
The key to reforming this system is to have patients pay for their medical use, drug use, and insurance use directly. By that I mean that it must be the patients/insureds to pay for all of these costs, from medical, and drugs, to health insurance. Having a system where more than 55% of the total medical costs is paid for by government, more than 30% is paid for by employers, and only about 15% is paid for by individuals means the system is always and totally out of wack. It is like the government giving people food cards which allow them to buy nearly any food they want in nearly any amount. With cost being no concern, eating habits would change dramatically, and food costs would soar. Think what would happen if this were to be extended to restaurant food service! This is the real reason medical costs are so high, we don't pay, either government does, or our employer does, and we want everything we are entitled to, now!!!
However, this is only one part of the cost of drugs in the US. Another significant part is that the drug company model for recovering drug costs (these are huge, and primarily due to inefficient, and ineffective federal government regulation, and the above ludicrous drug distribution, and rebate system) is to recover the primary costs of the drugs in the US market, and then recover the profits from the rest of the world markets. This means that the majority of the billions in research cost, drug testing costs, distribution costs, and other costs are placed on Americans (also remember that the foreign nations do not engage in the ludicrous US drug distribution system). This happens because the poorer nations cannot afford to pay much, and the wealthy advanced nations only are willing to pay for drugs if they can get below cost pricing. These nations are willing to cut a drug manufacture out of a market, even if it hurts their people, just to ensure it can get below cost pricing.
There are many ways to rectify this imbalance, but Trump will need to work with Congress to change the balance. One such method would be to pass a law requiring that the Average Wholesale Price (AWP) of a drug in the US could not be more than X times the AWP in the top 20 advanced nations. The penalty could be the drug could not be sold in the US, or there could be other stiff penalties. So, if drug Y were on average $100 per month, at AWP, in the top 20 advanced nations, and the multiplier were 1.5X, the here the US AWP would need to be no more $150 per month.
Another method of adjusting the price would be to allow US insurers to either negotiate prices directly or through multi-insurer groups so as to gain sufficient size to give these groups negotiating power. Then pass competition laws requiring similar pricing in drugs based on the size of the negotiating cohort, meaning that if a negotiating group was the size of the Belgium national health care system (based on lives) then the pricing between these two cohorts would have to be substantially similar, if the US group paid too much more, the law would institute penalties.
I do not think most of these changes would need that level of government interference, and that simply allowing insurers to negotiate together would pressure the drug companies to readjust their pricing structure, however, that may not be the case, and it might require more government action to force these issues.
Remember the European nations have been getting a super deal, and the US prescription drug users have been getting shafted for decades. This, and the fact that the European nations are all strapped for cash, and one of the core problems is their healthcare systems costs. Tripling the costs of prescription drugs would deeply upset this apple cart. Yes, many European nations would be facing perhaps even a tripling of drug costs.
As I have argued before, Trump seems to be laying out a serious plan to renegotiate the post WWII political, social, and economic order. It is these imbalances in things like drug costs, medical costs, innovation, and other technological issues that will take the most time, thought, and effort, but which are necessary to allow the rest of the world to begin to pull their own weight in the world. This will create great friction with all of the children living in the parents basement. They all believe they are adults, and they deserve these special benefits. Indeed, they do not believe they are special at all, but the way the world should work.
Welcome to reality folks. The world, and how it works, is about to be renegotiated, and you can be a party to this, or it can be done to you. I would suggest you become actively involved, and understand that much of the pain will flow your direction. This is because the US has been punching above its weight ever since WWII, and it is time for you to take some responsibility.