The Administration’s Orwellian Defense of Importing Foreign Price Controls

The Administration’s Orwellian Defense of Importing Foreign Price Controls

The Trump administration is out with a new blog post defending its plan to adopt foreign price controls for medicines covered under Medicare Part B. The blog was written in the wake of growing backlash from free-market thought leaders who are challenging the administration’s draconian proposal.

The latest blog post from the Department of Health and Human Services (HHS) includes numerous inaccuracies, with the chief example being the distorted view of how drugmakers set their prices in foreign countries. To help set the record straight, here are a few responses to the Trump administration’s flawed plan and the equally flawed rhetoric being deployed in its defense.

Claim: Drugmakers “voluntarily” cut their prices in foreign countries, which “enables and subsidizes socialist governments.”

To use HHS’s own rhetoric: “They could not be more wrong.” The truth is, in countries that impose a socialized approach to medicine, it’s the foreign governments who dictate the price for innovative treatments and cures – not the drugmakers. Without a competitive market to promote efficient pricing, companies are forced to take the price dictated by the government or else patients pay the price in the form of restricted access.

An editorial by The Wall Street Journal explains this point well, citing a recent study commissioned by none other than HHS:

“The Department of Health and Human Services study that was used to justify the new policy primarily references single-payer health systems, which use their considerable leverage to override market forces and say ‘take it or leave it’ when negotiating the price of medicines. That’s why U.S. patients can use 90% of new drugs, while only two thirds are available in the United Kingdom and 50% in France and Canada.”

Claim: Importing foreign price controls does not mean that “America’s seniors will experience access restrictions.”

Not true. Imposing price controls does, in fact, come at the expense of patient access to innovative medical treatments. Just look at the data:

Between 2011 and 2018, 74 new cancer drugs were launched. Ninety-five percent of these treatments are available in the U.S., compared with 74% in the U.K., 49% in Japan, and 8% in Greece – all nations that have adopted artificial price controls on the treatments available to their citizens.

As the numbers show, lower prices on drugs and other health care services that foreign countries dictate come with a cost – and we’re not just talking about financial savings – but also in terms of patient access to innovative medical treatments. For example, survival rates for many types of cancers in the U.S. are significantly higher than for patients in the U.K., largely because the U.K.’s health system restricts access to many therapies in an effort to drive down costs.

Even the President’s blueprint to lower drug prices raises this very same concern:

“Such price controls, combined with the threat of market lockout or intellectual property infringement, prevent drug companies from charging market rates for their products, while delaying the availability of new cures to patients living in countries implementing these policies.”

Claim: Importing foreign price controls will not have a meaningful impact on innovation.

As BIO’s Jim Greenwood wrote recently in The Hill, “Importing foreign price controls will take a wrecking ball to our global leadership in drug innovation. It may save some money for Uncle Sam, but it’s going to make it harder for your uncle Sam to access new medical breakthroughs.”

But don’t just take his word for it. Economists Joseph Golec and John Vernon estimate that if the U.S. had adopted European-style price controls on pharmaceutical drugs from 1986 to 2004, the U.S. would have produced 117 fewer new medicine compounds for the world.

And if the data doesn’t speak for itself, just listen to Secretary Azar, who once warned of “a very serious impact on world health because of the price controls and behaviors in other developed countries.” You can see for yourself here.

Claim: Medicare already sets prices for prescription drugs.

Also, not true. Medicare does not determine the price of a drug. Instead, Congress has created a system to establish reimbursement rates for prescription drugs provided under Medicare Part B. That system is based upon the Average Sales Price (ASP), which is based on negotiations that take place throughout the free-market. That’s a far cry from the “take it or leave it” approach used in foreign countries.

Claim: The administration is not interfering in federal programs that work.

Medicare Part B is working, and working extremely well. It treats some of America’s most vulnerable patients with health conditions that are often costlier to treat, yet it only represents 4% of total Medicare spending. That’s because a competitive, market-driven approach has kept average-weighted Part B drug costs below medical inflation – proving further that the current system works and adopting an international pricing structure would be a step in the wrong direction.

And don’t be fooled, the administration is also proposing significant changes to other federal programs it suggests “are already working.”

Within the past few weeks, CMS has reversed a long-standing policy and will now allow insurance plans in the Medicare Advantage (MA) program to impose “step therapy” requirements for physician-administered drugs covered in Medicare Part B. Such a move would increase MA plans’ negotiating power, artificially interfering with the market-based ASP. They also proposed a rule that would cut the number of drugs available to vulnerable patients who fall into one of six protected classes under Medicare Part D. These sharp departures from long-standing protections have led advocates to raise concerns on behalf of patients.

Despite all of the misdirection and misguided rhetoric, the blog post from HHS does get one thing right:

The best way to support future pharmaceutical innovation is to build a sustainable market-based system for pricing prescription drugs.

Those of us at BIO completely agree, which is why we can’t understand the administration’s decision to bring into the U.S. marketplace—which leads the world in biomedical innovation—the socialist pricing schemes of foreign countries. BIO’s Jim Greenwood has said that instead of exporting the solution, the administration is importing the problem. He’s right and patients deserve better.

Filed under: Health, , , , , , , , , ,