Major Executive Order Taking on Big Pharma


“As you know, for years and years, other nations paid less for drugs than we do,” he told reporters gathered on the South Lawn of the White House. “We’re working on it right now, we’re working on a favored nations clause, where we pay whatever the lowest nation’s price is.”

Trump said he will sign an executive order to implement the plan.

“Why should other nations, like Canada, … pay much less than us?” he asked. “They’ve taken advantage of the system for a long time, pharma.”

Before this, two weeks ago, Trump signed an executive order to improve the transparency of healthcare costs. Hospitals and insurance companies must tell patients their rates for services and what patients are expected to pay.

Since his inauguration, Trump has made reducing prescription drug costs a priority of his administration.

He isn’t wrong. Big Pharma has a racket. We pay a lot more than most countries and that keeps the drugs down in places like Africa. It has been going on for years. It’s redistribution. We are paying for drugs for other nations.

Other nations often have price controls, and we end up paying two to six times what other countries pay for the same drugs.

The Hill article reports:

Because the U.S. accounts for the plurality of global pharmaceutical revenues — in 2016 the U.S. comprised 42 percent of global pharmaceutical revenues — it faces an “innovation-access” tradeoff that other countries do not.

If the U.S. were to adopt price regulations like other countries, the impact on global pharmaceutical revenues would be substantial because the U.S. comprises a large share of global revenue. A 20 percent reduction in U.S. pharmaceutical prices would directly impact global pharmaceutical revenues, whereas an identical policy by any single European nation would have a small impact.

If reductions in global profits ultimately lower innovation, it could, therefore, be in the long-term self-interest of Americans to pay higher prices for drugs than citizens of other developed countries.

Problematically, policies designed to lower the prices that Americans pay for drugs and increase the prices that other countries pay may be difficult to enact. The core challenge is that individual countries behave, well, individually.

This is the absurd policy the U.S. has learned to accept. R & D is very important but do we have to pay for the world?

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