Price Control Plans from the Trump Administration and Congress are Wrong for America
The Trump Administration has been toying with the idea of implementing an international pricing index (IPI) model for Medicare Part B drugs and biologicals. The ostensible goal of the model would be to lower drug prices. This supposedly would be accomplished by pegging the price that the Medicare system pays for drugs to a level closer to the prices paid in a collection of other countries.
The IPI model represents bad public policy and poor negotiation: It abdicates all responsibility for market negotiation in favor of adopting the vagaries of foreign countries’ economic and pricing policies. The problem is that the comparison countries have warped prescription drug markets with socialist price controls.
In the State of the Union Address, President Trump said, “We will never let socialism destroy American healthcare.” Yet the IPI model would be a step in that exact direction. If implemented, the IPI model would make sweeping changes to the drug and biological supply chain and would have implications for drug and biological manufacturers, distributors, group purchasing organizations, hospitals, and physician clinics, among others. The IPI model would be imposed on a large share of physicians and hospitals nationwide.
By extension, these providers’ patients would be forced to adhere to the price-controlled model, too. This would reduce reimbursement for these hospitals and physicians’ practices which, could force many of them to close and consolidate with larger health systems thus making healthcare less accessible. The IPI model would restrict patient access to lifesaving drugs. Of the 27 drugs the Trump administration itself examined, only 41 percent were universally available in 16 comparison countries. Ninety-five percent of new cancer drugs are available in the United States; only 55 percent in the comparison countries. The average lag between the time cancer drugs are available in the United States compared to elsewhere is 17 months.
It should be obvious to any observer of global health care policy that socialist price controls are harmful to patients and would be harmful to the American economy. Why would Americans, who are accustomed to receiving excellent healthcare, want to be like those foreign countries where people suffer without proper medications and die early because they lack lifesaving medicines?
Unfortunately, President Trump highlighted another damaging proposal during State of the Union in the form of The Prescription Drug Pricing Reduction Act which was advanced out of the Senate Finance Committee late last year. Under this provision, a monetary penalty would be imposed on a manufacturer if the price increase of a medicine in Medicare Part D is greater than inflation. The implementation of this price control would allow the government to arbitrarily dictate which prices are and are not reasonable while introducing major inefficiencies into the system that will do nothing to help seniors. Coined as a subsidy cap or an inflationary penalty, this is nothing more than a price control meant to manipulate prices. When imposed on medicines, price controls suppress innovation and can severely limit access to new medicine.