President Trump recently unveiled a plan to, “Bring soaring drug prices back down to earth.” Acknowledging that the current system is broken, with drug prices beyond the reach of many patients, the President’s plan targets drug patents, pharmacy benefits managers, and drug pricing negotiated by foreign countries.
Yet he misses one of the big elephants in the room, the fact that here in the U.S, Medicare is forbidden to negotiate what they pay for prescription drugs. Back in 2016, he was on the same page with Hillary Clinton and Bernie Sanders, wanting a change in the 2003 law banning Medicare from negotiating drug prices.
Trump explained then, “We don’t do it. Why? Because of the drug companies.” So why not now? Why not change the law? Unfortunately Trump can’t change the law, instead it’s left to Congress. Would they do it?
Not likely as Big Pharma is the largest Congressional lobbying group, spending $280 million in 2017. With that kind of money flowing into Congressional reelection coffers, don’t expect a change in the current law.
Instead, Trump wants to stop foreign countries from negotiating lower prices that their national health services pay for U.S. drugs. For example, an injectable drug to treat macular degeneration or diabetic retinopathy would have a list price of nearly $2000 in the U.S., which Medicare is obliged to pay each month for most of these patients who require long-term treatment.
In other countries, such as the U.K. or Australia, their national health service negotiates the price to less than half of what Medicare pays. America is left holding the financial bag, paying sticker price while the rest of the world gets the fire-sale discount.
Medicare already consumes 15 percent of the federal budget and it’s cost tops $700 billion per year. Allowing Medicare to negotiate drug prices seems like a simple solution, but there is more to the story. Just remember that Bernie and Hillary also like the idea of allowing Medicare to negotiate drug prices and that should be enough to cause a sane individual to look a little deeper at the issue.
Why do pharma companies charge so much for their drugs? For some the motivation is greed as in the case of Pharma Bro Martin Shkreli, who is headed to prison for his efforts. For most, however, it’s to recoup the cost of bringing the drug to market.
The Tufts Center for the Study of Drug Development (CSDD) pegs the cost of developing a prescription drug that gains market approval at $2.6 billion. The approval process is long and arduous, taking 12 years on average for an experimental drug to travel from the laboratory to your pharmacy.
Few actually make it to your medicine cabinet. “Only 5 in 5,000 drugs that enter preclinical testing progress to human testing. One of these 5 drugs that are tested in people is approved. The chance for a new drug to actually make it to market is thus only 1 in 5,000. Not very good odds.”
It’s a high risk, high reward game. Clinical trials are expensive and time consuming with low odds of success. Much money will be spent on those 4999 drugs that don’t receive FDA approval, with a higher cost for those that progress further through the approval pipeline before getting the axe.
Recouping research and development costs is essential for keeping pharma companies in business, able to fund research into the next generation of drugs. Take away this financial return and incentive and who will develop new drugs? Make Apple charge only $100 for an iPhone and see what happens to future iPhones.
This is not because the FDA is mean, but because that is their mandate – ensuring that drugs are safe and effective. A mandate given to them by Congress who makes the laws that the various agencies interpret and implement.
What if the FDA could back off a bit on the effective part while maintaining their emphasis on safety, assuming Congress legislates this? Safety is paramount, efficacy perhaps less so. Even with the stringent current FDA rules, some drugs make to market and are discovered to not work very well.
Efficacy in a clinical trial is an average of all study subjects meaning that if a study drug helps some patients but not most, the overall results will be that the drug doesn’t work. Yet for some it does. Why not let the physician decide when to use it based on their experience? This is the “art” of medicine.
This would lower the bar for new drug approval and reduce the cost of bringing a drug to market. Simply using price controls to keep drug prices artificially low via negotiating with Medicare will stifle the pipeline for newer and better drugs.
Similarly making foreign countries pay more for U.S. drugs won’t work, as these foreign health agencies live within a budget. They will purchase less U.S. drugs or none at all. Rationing care is nothing new in government-run health schemes.
It’s better to address the root cause of the high prices. For drugs, it’s the research and development costs. Making the drug approval process easier attacks the root of the problem rather than using price controls which are just a band-aid on an open sore. Streaming line the FDA approval process is a measure the president could get behind if he wants to lower drug prices.
Image credit: Shutterstock.com