Donald Trump on Drugs
(A version of this Health Alert was published by Forbes.)
In last Thursday’s Republican presidential primary debate in Florida, Donald Trump made the curious assertion that Medicare does not “bid out” prescription drugs, before moving on to a similar assertion about military procurement. As with all thing related to whatever “Trumpcare” would look like if he were President, this statement requires some effort to decipher.
Medicare’s prescription drugs are very well “bid out.” Indeed, they are “bid out” twice – both directly and indirectly. Doctors and hospitals are not “bid out” at all. Instead, they are subject to Soviet-style price fixing by a central government authority. This is changing quickly, but the alternative payment methods are at a very early and unproven stage. Further, these alternative payment methods are not subject to competitive bidding, but to quality measures dictated by the central government (as I described last week).
Medicare spending on durable medical equipment (for example, walkers or oxygen equipment), prosthetics, and other supplies (for example, diabetic test strips) has been competitively bid since 2011. However, those competitive bids are delivered to the central government. Medicare prescription drugs are doubly bid, because drug-makers do not negotiate prices with the central government. Instead, health insurers compete to provide Medicare Part D drug plans, and the winning insurers negotiate with drug-makers for medicines. Consumers of prescription drugs enjoy two levels of protection from political interference.
With respect to the private market, Mr. Trump goes even further. He does not want Chinese goods or Mexican workers to come into America. However, he intends to:
Remove barriers to entry into free markets for drug providers that offer safe, reliable and cheaper products. Congress will need the courage to step away from the special interests and do what is right for America. Though the pharmaceutical industry is in the private sector, drug companies provide a public service. Allowing consumers access to imported, safe and dependable drugs from overseas will bring more options to consumers.
A more wrong-headed notion of free trade would be hard to imagine. One thing he is right about is that the pharmaceutical industry comprises a “special interest.” And it is a “special interest” off which politicians like Hillary Clinton feed quite well.
However, free trade requires willing buyers and sellers. If they want to keep innovating, brand-name pharmaceutical companies cannot sell their pmedicines in the U.S. at the same prices they sell in foreign countries. Those prices can cover manufacturing and distribution, but are too low to sustain research and development. Foreign drug companies, like GlaxoSmithKline or AstraZeneca are free to sell their medicines in the U.S., and they oppose so-called “importation” outside their normal distribution networks. (Even the Wall Street Journal editorial board, which also criticizes Mr. Trump’s pharmaceutical policy, confuses this, writing on March 8 against the “importation of foreign-made drugs.”)
Many people blame foreign governments’ price controls for artificially low prices. However, there is also market segmentation: Other countries have lower incomes than the U.S. does, so manufacturers charge lower prices.
This happens even in unregulated retail markets. I just checked the price of filing my U.S. tax return via TurboTax. The most popular version costs $34.99 for the federal return only. TurboTax Canada charges C$19.99, about $14.99, or less than half the price of the U.S. version.
Whether the reason for lower drug prices in other countries is government price controls or manufacturers’ pricing strategy, the policy endorsed by Mr. Trump is certainly not about “free markets.”
The best way to lower prescription drugs prices is not to fight against the companies that research, develop, and manufacture them. It is to reduce the regulatory burden of the Food and Drug Administration so new medicines are launched faster at lower cost. Mr. Trump’s “healthcare plan to make America great again” does not mention the FDA even in passing.
Americans are brainwashed into oblivion about drugs. Children in the United States are three times more likely to be prescribed antidepressants as children in Europe are. A shocking Government Accountability Office report discovered that approximately one-third of all foster children in the United States are on at least one psychiatric drug.
Prescription Painkiller Crisis: Why Do Americans Consume 80 Percent Of All Prescription Painkillers in the World?
If Americans are so happy, then why do we consume 80 percent of the entire global supply of prescription painkillers? Less than 5 percent of the world’s population lives in this country, and yet we buy four-fifths of these highly addictive drugs. In the United States today, approximately 4.7 million Americans are addicted to prescription pain relievers, and that represents about a 300 percent increase since 1999.
http://www.zerohedge.com/news/2016-03-15/why-do-americans-consume-80-percent-all-prescription-painkillers
HOUSTON – we have a problem…
Name-brand drug makers earn much of their revenue in the American market. Foreign markets, where prices are lower, are still profitable at the margin, since the marginal cost to manufacture a pill is lower the discounted price. But most economist do not believe charging one price worldwide will lower drug prices for Americans. The reason is that firms would have to charge a much higher price elsewhere in the world and forgo sales abroad rather than lose revenue in America.
In this post, David E. Williams from the Health Business Blog explains how price discrimination in the pharmaceutical market works.
“do not believe charging one price worldwide will lower drug prices for Americans.”
However, permitting Americans to buy abroad may level out some of the bumps seen in pharmaceutical pricing which would be helpful.
“Because of the opportunity for price discrimination”
Doesn’t the opportunity mean that subsidizing or using mandatory pooled money to buy these expensive medications offers the pharmaceutical companies a way of charging such high prices both now and in the future?
To maintain price discrimination, drug companies must have the ability to prevent arbitrage. The prohibition on importing prescription medications by anyone but the manufacture is what prevents CVS, Walgreens or Rite Aid from buying a patented drug licensed to a drug maker in India and importing them.
In the past the process was called “reimportation” since it is also illegal to buy a cheap drug exported to Canada and import it back to the United States at a price-controlled rate.
As the linked blog post explains, Gilead goes so far as to not dispense Sovaldi to anyone in India unless they have residency and will only dispense small numbers of pills at a time. Were Gilead to sell Sovaldi in pharmacies at the Indian price of about $4.00 a pill, most of the pills would likely flow back to Europe and the United States when enterprising pharmacists illegally diverted them to the more lucrative market where their “list price” is $1,000.
“To maintain price discrimination, drug companies must have the ability to prevent arbitrage.”
The consumer has a similar ability and that is to refuse to pay the price.
What would happen if an insurer determined a maximum allowance for these expensive drugs that was equal to the average amount paid by all first world nations? The difference plus the copay would be paid by the consumer. Would the consumer be willing to pay such a high price especially where the drug didn’t provide a guarantee of satisfactory results. If the consumer stops buying prices have to come down or the company cannot recoup its investment. If the consumer pays any price for life the prices will continue to rise until the price is worth more than life.
—I just checked the price of filing my U.S. tax return via TurboTax. The most popular version costs $34.99 for the federal return only. TurboTax Canada charges C$19.99, about $14.99, or less than half the price of the U.S. version.—
Is the Canadian tax code as complicated as the United States? This just seems like an odd choice to compare because the are 2 different products.
We should ban drug makers from fueling the propaganda machine of FOX News and other media. We are not going to get real information and news on drug makers as long as they fund the propaganda with their advertising. This advertising ban would bring drug prices down and free the media to report the truth. Trump should also ban drug makers from giving non-profit think tanks money too so that we can have real information.
It has been reported that when medical marijuana is legal over-dose deaths from prescriptions drop by 25%. You won’t hear this on FOX News because the drug makers don’t want any competition to their products.
I have filed personal income taxes in both countries. I actually find U.S. taxes marginally easier to work out.
Here in the United States John we believe in FREEDOM and not the omnipotent power of the State. I know you want block grants to the States for Medicaid but others like Dr. Lee Hieb think more like me. Dr Lee Hieb writes today:
—Trump’s second proposal is to block-grant payment for Medicaid to the states. Now this sounds like a good idea to promote local control – but–be not so deceived. The Donald may not realize this – I’ll give him the benefit of the doubt – but Medicaid block grants are nothing more than a slush fund for corrupt politicians, bureaucrats and the companies that administer Medicaid.
The largest percentage of the federal budget in 2014 went to health care (25 percent), and Medicaid from the feds was roughly $350 billion – a huge distribution of very squishy funds. So now Trump wants to distribute enormous funds – billions – to local state used-car-salesmen-turned-politicians to distribute. The phrase “ripe for fraud” was how my insurance agent put it.—
Read more at http://www.wnd.com/2016/03/2-ways-trump-gets-health-care-wrong/#ALOJb5hVreWBY7Lp.99
Dr. Lee Hieb – Dr. Lee Hieb is a US Navy Veteran, an Orthopedic Surgeon and past President of the Association of American Physicians and Surgeons (AAPSonline.org)—”The voice for Private Practice since 1943.” It was the AAPS lawsuit, AAPS VS Clinton, that stopped HillaryCare in the 1990’s.
John, why would you want local state used-car-salesmen-turned-politicians getting billions and billions of taxpayer dollars to be doled out to those that bribe them?
Dr. Lee Hieb’s insurance agent sounds like a smart guy with the “Ripe for fraud,” comment.
WE don’t really “want” block grants to the states. That is the best option in Congress now, so we encourage it.
However, we advocate the individual has first call on the dollars. If he declines to claim them, they would go to the state.
Your article is superficial and asymmetrical in a number of ways. You claim to take issue with Trump’s point about bidding outhe to reduce prices but instead point to so-called market forces that keep prices considerably higher than any other country. Then you try to equate apples with watermelons by comparing artificial state boundaries that elevate Healthcare costs with strategically, consistently devalued currencies from other countries that have decimated American industry. Do you always think and write in such muddled ways?