[Ip-health] Ed Silverman: Dear President Trump: Your big idea on drug pricing is half-baked

Jamie Love james.love at keionline.org
Tue Feb 7 05:58:55 PST 2017

This is Ed Silverman's take on Trump wanting to make other countries pay
more for drugs.

(While Ed correctly notes it is hard to get foreign governments to agree to
pay more for drugs, it is worth noting that Presidents HW Bush, Clinton, GW
Bush and Obama have all sought to do this, in various ways, with partial
success, particularly in developing countries, and less so in higher income


Dear President Trump: Your big idea on drug pricing is half-baked

By ED SILVERMAN @Pharmalot

FEBRUARY 6, 2017

Dear President Trump,

When you met with several pharma executives last week, you complained about
“astronomical” drug prices and promised to cut regulations so medicines
could be approved faster.

That’s standard campaign fare. But one remark was particularly curious —
you accused foreign governments of “freeloading” by imposing price controls
on medicines, which cut drug makers’ profits and, as a result, make it more
difficult to finance research and development. You promised, without
specifics, to use trade policies so that foreign countries would pay their
“fair share.”

Let’s be blunt: Your idea is half-baked. Why? Because it is much more
complicated than you think.

Unlike the United States, most other countries provide some form of
insurance coverage for their populations and take responsibility for
negotiating drug prices. Government agencies around the world have been
pushing back against drug makers over the rising cost of medicines, a
development that has proven not only popular with voters, but increasingly
necessary given strained budgets.

Some Americans, however, grumble that they are, in effect, subsidizing
other countries. That may be true, but the US has failed to take any
significant steps to lower prices. And while you profess a desire to tackle
this issue — and play to your populist base — you have sent mixed messages
about allowing Medicare to negotiate. And you have only paid lip service to
the idea of allowing drugs to be imported.

Perhaps this is because you have realized that the Republicans controlling
Congress are unlikely to back proposals that would upset brand-name drug
makers, who are big campaign contributors. Of course, you’re full of
surprises and may yet take action. But using strong-arm tactics — in the
form of trade deals that force other countries to pay more for medicines —
must seem like an easier fix.

Well, good luck. Other governments are unlikely to acquiesce so easily.

“Expecting other countries to pay their fair share is patently absurd,”
said Kurt Kessler of the ZS Associates pharmaceutical consulting firm. “It
could quickly turn into a backlash against the US. Imagine the reaction
from other governments: ‘You’re going to beat us with a stick and make us
pay more for something, when our system already works well, so that it’s
easier for Americans to pay less?’” said Kessler, who is based in
Switzerland and specializes in global marketing strategies.

Just spin a globe and you can find any number of battles currently underway
over pricing — in countries that are well off, and some that are less so.

In Ireland, health authorities are fighting Vertex Pharmaceuticals over the
price of a cystic fibrosis drug. The Canadian government is in court
calculating restitution won from Alexion Pharmaceuticals for overcharging
for a rare disease treatment. The Colombian health minister unilaterally
cut the price of a Novartis drug after bitter negotiations failed. And the
Chilean congress asked the president to establish procedures for
sidestepping patents on medicines so that lower-cost versions could be

The US is unlikely to be able to use trade agreements as leverage to raise
prices abroad. Such pacts often require countries to protect drug makers’
patent rights. But they are not obligated to buy those drugs or to
guarantee certain pricing in public hospitals, for instance. And under a
World Trade Organization agreement, countries have the right to take the
approach being pursued by Chile to create low-cost alternatives to pricey
brand-name drugs.

There may be some routes open to you, however. Perhaps your team could
pursue trade deals that eliminate reference pricing, which is when a
government evaluates the effectiveness of different drugs used for treating
the same disease and sets reimbursement based on the least expensive
choice. Or you could restrict the use of formularies, which are lists of
drugs that receive certain coverage.

“Any smart country would fight back, though, because they’re at the mercy
of [pharmaceutical] monopolies,” said Brook Baker, a professor at
Northeastern University School of Law and a senior policy analyst for
Health GAP, a group that advocates for wider access to medicines. “It’s not
that these countries are getting a free ride. What you see is a willingness
to tame the excesses of a free market.”

There is another point worth noting.

Even if other countries began paying more for medicines, there is nothing
to say this would result in greater research or more jobs in the US. Maybe
drug makers would use the extra revenue for more research. That would be
nice. But they could just as easily raise shareholder dividends or divert
some of the money to more heavily promote their medicines. Most likely, it
would be all of the above.

Meanwhile, though, you risk souring relations with some countries over a
pocketbook issue that resonates widely no matter where you look. And it
will do nothing to solve the affordability problem confronting many

So before you complain too much about others not paying their fair share,
perhaps you should sort out how Americans can pay a reasonable share for
medicines, too.

James Love.  Knowledge Ecology International
KEI DC tel: +1.202.332.2670, US Mobile: +1.202.361.3040, Geneva Mobile:
+41.76.413.6584, twitter.com/jamie_love

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