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In the unlikely event the Trump administration sticks with the proposal it rolled out recently to set Medicare drug prices based on international prices, it's setting up a fight with the GOP and the right.
Will it stick to its guns and enrage its ideological allies by embracing price controls?
Or will it retreat from the only ideas it has come up with to try and make good on Trump's dormant campaign pledge to do something about drug prices, even as the industry thumbs its nose at his bluster ("Pfizer raises drug prices again, rebuking Trump ")?
GOP balks at Trump drug pricing plan
Fifty-five conservative groups and activists sent HHS a strongly worded letter last week objecting to the proposal:
Stephen Moore is making the same argument in the National Review: Drug-Price Controls Can Be Injurious to Your Health
This could get interesting, assuming Trump doesn't fold quickly.
Will it stick to its guns and enrage its ideological allies by embracing price controls?
Or will it retreat from the only ideas it has come up with to try and make good on Trump's dormant campaign pledge to do something about drug prices, even as the industry thumbs its nose at his bluster ("Pfizer raises drug prices again, rebuking Trump ")?
GOP balks at Trump drug pricing plan
Republican opposition is building to a proposal from President Trump to lower drug prices in Medicare.
The rare break between Trump and Republican allies follows an aggressive step from the president in October that would tie certain Medicare drug prices to lower prices in other countries, a departure from the traditional GOP position.
But critics worry the move is essentially importing price controls from other countries, which is anathema to free-market minded Republicans, who are pushing back.
“I understand that we do want to get drug prices down but I think that any proposal that would lead to government price-fixing in that space is a pathway we don't want to follow,” Rep. Larry Bucshon (R-Ind.), the first GOP lawmaker to publicly criticize the proposal, told The Hill.
Fifty-five conservative groups and activists sent HHS a strongly worded letter last week objecting to the proposal:
The proposed payment model imports foreign price controls into the U.S. by modifying the Part B reimbursement rate so that it is calculated based off the prices set by 14 countries.
Instead of relying on government price setting, Medicare Part B is currently calculated based on market prices. The formula, which is based on the “Average Sales Price” (ASP) in the U.S. market, includes the discounts negotiated between payers, hospitals and health plans. Recently this system led to a 0.8 percent decrease in the cost of the top 50 Part B drugs.
In contrast, foreign countries frequently utilize a range of arbitrary and market distorting policies to determine the cost of medicines – by definition such approaches are price controls. There is no negotiation and foreign governments often force innovators to accept lower prices in a “take-it-or-leave it” proposition. This results in reduced or restricted access to new medicines and higher prices for those medicines that enter the market.
Conservatives have long opposed price controls because they utilize government power to forcefully lower costs in a way that distorts the economically-efficient behavior and natural incentives created by the free market.
When imposed on medicines, price controls suppress innovation and access to new medicines. This deters the development and supply of new life saving and life improving medicines to the determent of consumers, patients, and doctors.
Stephen Moore is making the same argument in the National Review: Drug-Price Controls Can Be Injurious to Your Health
But Trump should beware. No one benefits if the U.S. — even inadvertently — imports unreasonable price controls from other nations that would erase the profits from creating the drugs in the first place. Many studies have shown that when nations artificially lower prices for drugs and other American-made health innovations, the very R&D spending that leads to miracle treatments and cures falls.
This could get interesting, assuming Trump doesn't fold quickly.