President Trump Wants Market Reforms to Reduce Drug Prices

President Donald Trump continues to address the American people's practical needs. Now, he is out to reduce drug costs with his latest initiative "American Patients First."

Barack Obama recognized there was a health care problem. But he took the wrong action by pushing through Congress legislation that dramatically raised the cost of health insurance and reduced the medical choices for many Americans.

After making the health care problem worse, the Left fixated on pharmaceutical costs. And prices are too high. Noted Alex Azar II, the Secretary of Health and Human Services: "This burden has become a threat to the financial security of far too many of our seniors, neighbors and communities."

The administration identified several issues: high list prices, government health care programs paying more than necessary, excessive out-of-pocket costs, and "foreign governments free-riding off of Americans investment in innovation."

In fact, drugs are cost-effective compared to other medical treatments, such as surgery and hospitalization. Moreover, medicine is expensive to make—most research ends up as dry holes. The few successful pharmaceuticals must pay for the failures. Other countries
employ price controls, taking advantage of Americans who pay the bulk of the costs.

Unsurprisingly, liberals propose to use the nostrums of the past to reduce pharmaceutical costs. Price controls, of course. Restrictions on patient choice. Limiting patent rights, which create the incentive for drug research. Government "negotiation" through use of its near
monopoly market power.

The president is determined to reduce drug costs. "One of my greatest priorities is to reduce the price of prescription drugs." But that is not his only important goal.

Noted Ronald Bailey of Reason magazine, "Imposing price controls would lower prices, but at the cost of creating shortages, developing fewer new drugs, and—ultimately—compelling Americans to lead sicker and shorter lives." Thus, government should use markets and competition to lower prices, while preserving the incentive for companies to develop
new medicines. Uncle Sam must not kill the golden goose.

President Trump, who has made economic recovery a major priority, has just such a strategy. Overall, he is pushing competition, incentives, and negotiation.

First, he emphasized "reducing regulatory burdens so drugs can be gotten to the market quicker and cheaper." Safety is essential, but needlessly delaying drug approvals denies potentially life-saving medicine to needy patients, creating even more harm. Under Commissioner Scott Gottlieb the Food and Drug Administration already has accelerated drug approvals.

An important aspect of the president's regulatory reform is to prevent drug makers from gaming the rules. Companies are adept at taking advantage of laws and regulations that are supposed to protect the public.

President Trump's second initiative is to speed approval of "over-the-counter medicines so that patients can get more medicines without prescriptions." These drugs are cheaper. Allowing people to purchase them also saves the cost of going to the doctor for a
prescription.

The third prong of the president's plan is to increase competition, which is critical in any free market. Secretary Azar cited the administration's Drug Competition Action Plan, which "makes the approval process of generic drugs more efficient, encouraging lower
prices through robust competition."

Indeed, generic drugs are one of the most important means to cut the cost of brand name drugs. More generics were approved last year than ever before even as patent rights were preserved. Explained President Trump: "Our patent system will reward innovation, but it will not be used as a shield to protect unfair monopolies."

Fourth, the administration is reforming rules governing Medicare. These changes saved recipients $320 million in out-of-pocket costs. HHS also encouraged substitution of generics, saving the government money as well. The agency is experimenting with other initiatives to achieve better medical value and planning to help Medicare D plans negotiate better drug prices.

The president also is changing Medicare rules to make prices more transparent. Barring Medicare Part D contracts from prohibiting pharmacists from telling patients when costs would be lower without using insurance. Providing more cost information to patients. And restricting pharmaceutical rebates which hurt consumers.

Moreover, the administration plans to review Obamacare taxes and rebates which raise pharmaceutical costs and take steps to end "the global freeloading once and for all," as the president put it. Other important changes include requiring drug firms to include list prices
in their ads.

Pharmaceuticals are among the many modern medical miracles which we all enjoy. Azar observed that "We are living through the most innovative era in the history of medicine. Our free-market system has produced cures and treatments that seemed impossible a short while ago."

Drug costs still need to come down. It is vital, however, that Washington not discourage continued innovation. The president's reforms strike precisely that balance.