[Ip-health] New York Times: To Lower Drug Costs at Home, Trump Wants Higher Prices Abroad

Thiru Balasubramaniam thiru at keionline.org
Fri May 11 08:00:09 PDT 2018


To Lower Drug Costs at Home, Trump Wants Higher Prices Abroad

By Robert Pear

May 9, 2018

WASHINGTON — President Trump, poised on Friday to unveil his strategy to
lower prescription drug prices, has an idea that may not be so popular
abroad: Bring down costs at home by forcing higher prices in foreign
countries that use their national health systems to make drugs more

On Tuesday, Mr. Trump rebuffed his European allies by withdrawing from the
Iran nuclear deal. Threatened tariffs on steel and aluminum have strained
relations with other developed nations. And now the administration is
suggesting policies that could hit the pocketbooks of some of America’s
strongest allies.

“We’re going to be ending global freeloading,” Mr. Trump declared at a
meeting with drug company executives in his first month in office. Foreign
price controls, he said, reduce the resources that American drug companies
have to finance research and develop new cures.

The White House Council of Economic Advisers fleshed out the idea three
months ago in a report that deplored the “underpricing of drugs in foreign

The council said that profit margins on brand-name drugs in the United
States were four times as high as those in the more regulated markets of
major European countries and Japan. The United States, it said, needs to
“address the root of the problem: foreign, developed nations, that can
afford to pay for novel drugs, free-ride by setting drug prices at unfairly
low levels, leaving American patients to pay for the innovation that
foreign patients enjoy.”

Mr. Trump plans to lay out his ideas on Friday. Alex M. Azar II, the
secretary of health and human services, said in a speech on Wednesday that
the administration would attack several problems, including high list
prices set by drug manufacturers; rising out-of-pocket costs for consumers;
and “foreign governments free-riding off of American investment in

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Administration officials have raised expectations that the president’s
proposals will have a far-reaching impact. “Bold action is on the way,” Mr.
Azar said last week.

So is resistance.

“Canadian drug prices are among the highest in the world,” said Tammy
Jarbeau, a spokeswoman for Health Canada, the national health department.
“Our plan is to bring down prices so they compare more favorably with those
of other countries of comparable size and economic development.”

And Democrats called it naïve to think that American drug companies would
lower prices in the United States if they could increase drug prices abroad.

“There is absolutely no reason to believe that trade policies designed to
raise prescription drug prices overseas will result in equivalent or any
decreases in prices in the United States,” six House Democrats, led by
Representatives Jan Schakowsky of Illinois and Rosa DeLauro of Connecticut,
said in a recent letter to Mr. Trump.

People who work in the industry said it was unlikely that consumers would
go to the pharmacy counter and see a meaningful reduction in drug prices
before the end of the year.

Mr. Trump is expected to criticize brand-name drug manufacturers for high
list prices and maneuvers that delay the marketing of lower-cost generic
drugs. He is also expected to go after middlemen known as pharmacy benefit
managers, saying they profit from rebates paid by drug companies but do not
share much of the savings with patients.

Dr. Peter B. Bach of Memorial Sloan Kettering Cancer Center in New York, an
expert on drug prices, said: “Administration officials are talking about
defects in the market that make some drugs unaffordable. The real question
is whether the president will take on new brand-name drugs that have no
competitors and cost hundreds of thousands of dollars a year.”

The United States can pressure foreign nations through diplomacy and trade
negotiations. In its annual report card on the protection of intellectual
property rights around the world, the United States trade representative
last month criticized the drug pricing and reimbursement policies of
Canada, South Korea, Japan, India, Turkey, New Zealand and a number of
European Union countries, saying they did not adequately recognize the
value of innovative medicines.

America’s trading partners must “contribute their fair share to the
research and development of new cures and therapies,” the report said,
echoing Mr. Trump’s contention that foreign price controls were “very
unfair to this country.”

The report said the Trump administration had recently secured a commitment
from South Korea to revise its drug pricing policy to provide higher
payments for certain innovative American-made drugs. But the administration
said it was concerned about the way Canada sets price ceilings for many
prescription drugs. An independent quasi-judicial body reviews drug prices
in Canada to make sure they are not excessive.

Canadian officials say they have no interest in raising prices to allay the
concerns of Trump administration officials or American drug companies.

But the Pharmaceutical Research and Manufacturers of America, the main
lobby for drugmakers, welcomed the new emphasis by the Trump administration.

“In many countries, governments are the principal purchaser of medicines
and effectively dictate prices,” the group told the administration.
Government price controls in Canada, Japan, Korea and other markets
“substantially eliminate incentives to invest in the development of new
medicines,” the drug lobby said.

Mr. Azar said the administration would also tackle another problem:
“government programs overpaying for drugs.”

Seema Verma, the administrator of the Centers for Medicare and Medicaid
Services, said Medicare and Medicaid, which cover more than 100 million
people, account for nearly 40 percent of all drug spending in the United

“Being the largest payer of health care services,” she said, “we will use
our considerable influence” to move the market toward lower drug prices.

In advance of the speech by the president, administration officials have
been targeting the role of pharmacy benefit managers, which negotiate with
drugmakers to obtain price concessions in the form of rebates. The rebates
are typically calculated as a percentage of a drug’s list price, set by the

“All of the incentives are lined up for manufacturers to set higher and
higher prices,” Ms. Verma said. “When prices go up, patient cost-sharing
also goes up.”

The administration wants benefit managers and insurers to pass on more of
the savings to consumers.

Dr. Scott Gottlieb, the commissioner of the Food and Drug Administration,
sent a chill through financial markets last week when he asked what would
happen if the federal government re-examined the “safe harbor” that
provides legal protection for drug rebate payments.

“Such a step could help restore some semblance of reality to the
relationship between list and negotiated prices, and thereby boost
affordability and competition,” Dr. Gottlieb said.

Administration officials say they know that drug companies have discovered
cures for diseases that once killed millions. But, Ms. Verma said,
“lifesaving treatments do not mean anything if patients cannot afford them.”

“While it is wonderful news that there are hundreds of gene therapies in
development,” Ms. Verma said, two cancer therapies that have reached the
market — Yescarta and Kymriah — “have been priced at $373,000 and $475,000,
and a new gene therapy for certain forms of blindness” — Luxturna — “has
been priced at an astonishing $850,000.”

Thiru Balasubramaniam
Geneva Representative
Knowledge Ecology International
41 22 791 6727
thiru at keionline.org

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