Politics

Questions Surround ‘America First’ Plan on Overseas Drug Prices

Trump calls overseas costs unfair compared to U.S.

President Donald Trump speaks to supporters at a campaign rally on May 10 in Elkhart, Indiana. The crowd filled the 7,500-person-capacity gymnasium. (Scott Olson/Getty Images)

President Donald Trump took aim at “global freeloading” in his Friday speech on drug prices, putting an “America First” angle on a complicated policy issue. Although Trump’s rhetoric in the speech was fairly tough on the pharmaceutical industry, this issue was one area where Trump was borrowing a page from the Big Pharma playbook.

For all the resonance this part of the drug pricing debate might have with Trump and his political supporters, the administration’s accompanying policy blueprint had few details on how to address what other countries pay for prescription drugs. Questions remain over whether higher prices overseas would translate into lower prices in the United States.

“You can look at some of the countries, their medicine is just a tiny fraction of what the medicine costs in the U.S.A,” Trump said. “It’s unfair.”

The administration — and the drug industry — is particularly miffed that other wealthy nations, like Canada, South Korea and European countries, exert drug price controls through their government-controlled health care systems. At the same time, the administration and the pharmaceutical industry contend that American companies and taxpayers pay a disproportionate share of drug development costs, and are being shortchanged when foreign countries pay less.

Trump called the situation an “injustice” that he would direct U.S. Trade Representative Robert Lighthizer to bring up during trade negotiations.

“We have great power over the trading partners,” Trump said. “You’re seeing that already.”

A top target for the administration, and the pharmaceutical industry, is Canada. At the industry’s urging, the administration recently added Canada to a “priority watch list” of countries that the U.S. says partake in unfair trade practices.

When the U.S. added Canada to its watch list in an annual report on trade concerns in April, the Canadian policies it highlighted largely matched the concerns the pharmaceutical industry had raised.

The drug industry is worried that a recent policy change by Canada’s drug price review board could cost American companies $2.2 billion a year, and companies say the Canadian government has too much power to disclose information about drugs it says may present serious risks.

The U.S. is currently trying to renegotiate the North American Free Trade Agreement with Canada and Mexico.

The administration’s “American Patients First” blueprint proposed ways to address high drug prices, particularly in the realm of the Medicare system and approvals for lower-cost generic drugs. On the trade aspect, it simply said the government would investigate how to address foreign intellectual property violations and work “to develop the knowledge base necessary to address the unfair disparity.”

Reaction

When asked whether Trump could have some success extracting drug pricing changes from other countries, some observers think it’s possible.

“This president has entered into trade negotiations with a very different mindset than other presidents. If he is locked into this being a major piece of any type of trade negotiation, I would say yes,” said Michael Strazzella, a lobbyist who specializes in health policy at the firm Buchanan, Ingersoll & Rooney. He noted it may vary by country. In some cases, it could be a bargaining chip, while in others, it might be a non-negotiable demand.

A spot on the watch list that Canada was placed on can be a precursor to trade sanctions, said Peter Maybarduk, director of the Access to Medicines Campaign and consumer watchdog Public Citizen.

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“Countries sometimes are scared by these pressure tactics,” he said, noting that they would be most effective on developing countries. “Like anything in diplomacy, there’s an awful lot of soft tools that can cost people’s lives, because they can encourage or prevent action. And we’re talking about the United States of America, still the most powerful country on Earth.”

The administration’s clout can be seen in a renegotiated free trade agreement finalized in March. The U.S. got South Korea, which pays on average about 44 percent less for drugs than other wealthy countries, to agree to “amend” its drug pricing policies to “ensure non-discriminatory and fair treatment for U.S. pharmaceutical exports.”

It remains to be seen whether South Korea will actually change anything. Others question why the politics of high drug prices would be any different in other countries than it is here.

“Why would a country do that? Why would they spend more money electively?” asked Arthur Garson, director of the Health Policy Institute at the Texas Medical Center and a professor at the University of Texas School of Public Health.

He and other experts don’t think the U.S. has demonstrated that pressuring other countries to increase prices would actually help people here.

“Big Pharma companies soak U.S. patients and payers for whatever they can get away with because the US government lets them do so,” Brook Baker, a professor of law at Northeastern University, wrote in a blog post shortly after the USTR report was published. “There is not one documented case of a U.S. drug company dropping a U.S. price because of a price increase in another country.”

Other scholars say that mathematically, the argument that the prices in the U.S. are necessary to cover the research and development doesn’t pan out. “We found that the premiums pharmaceutical companies earn from charging substantially higher prices for their medications in the U.S. compared to other Western countries generates substantially more than the companies spend globally on their research and development,” researchers writing for the journal Health Affairs found last year.

Garson argued that if drug companies want to make the claim that lower prices abroad harm research and development, they should prove it by being more transparent about those costs. He also suggested that the U.S. should take a cue from other countries, like the United Kingdom, that use cost-effectiveness analyses to determine what to pay for drugs based essentially on an assessment of whether the drugs are worth their expense.

“Cost-effectiveness analysis does not necessarily mean that the drug companies would make less money,” Garson said. “It just means that we, the consumer, should not be paying for things that are not really valuable.”

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