President Trump, hate him, love, him or just entertained by him; could not have been clearer about his intentions on drug pricing. Much to the chagrin of the pharmaceutical industry, drug prices are going to come down. Quickly. We’re talking deep dive, fast and furious, bottomline-imploding down. Here are the President’s exact words from Tuesday’s address to the U.S. Congress and the American people:
“We should implement legal reforms that protect patients and doctors from unnecessary costs that drive up the price of insurance – and work to bring down the artificially high price of drugs and bring them down immediately.”
This shouldn’t come as any surprise to the pharmaceutical industry; Trump has been saying this throughout his campaign and now while in office. However, the President was noticeably forceful when making the above statement. One must ask how the pharmaceutical industry can look away in hopes the entire discussion will go away. With less than a third of actual drug use in the United States but upwards of two-thirds global profitability coming from exorbitant U.S. drug prices, the American taxpayer will no longer be the beast of burden carrying the industries bloated cost structure.
America should take a hard look at drug pricing; it should have been done long ago. The recent scandals on price gouging – examples: Mylan’s EpiPen price increasing 500 percent in seven years and Marathon’s plan to sell a drug for $89,000 in the U.S. that sells for 70 percent less in the United Kingdom – didn’t sit well with the government or consumers. And why should they? Why should Americans pay haute couture prices when the rest of the world pays knock-off prices for the same drugs?
President Trump isn’t the only world leader voicing displeasure over the high cost of drugs. Last year, China’s President Xi Jinping made it clear to global pharma that if they want to sell in China their prices must come down. But, as in America, this is not an entirely bad thing. China is in the process of reforming its national healthcare system, which includes increasing access to healthcare services and broader insurance coverage to the entire population of 1.4 billion citizens. In the past, all but basic health care was largely available only to those in urban areas. Also, China is expanding its national approved drug formulary, including many innovative western drugs. Thus, while drugs prices will come down significantly in China, access will eventually be up, way up.
It stands to reason that more affordable pricing coupled with more people with health insurance means higher sales be it China or the United States. But will that happen in the United States under Trump? In an interview last Sunday, U.S. Treasury Secretary Steven Mnuchin said the President’s budget proposal will spare big social welfare programs such as Medicare from any cuts. He did not mention his boss’ tough negotiating skills. Only a fool would doubt drug prices will go down.
The current prohibition to negotiate drug prices for Medicare, the largest pharmaceutical “customer” in the nation, is utterly anathema to the deal-maker-in-chief.
Medicaid is also in the sights of the Trump administration, which dramatically expanded under the Affordable Care Act. The number of Americans covered by Medicaid and the related Children’s Health Insurance Plan saw a 30 percent increase from before the Affordable Care Act (ACA) to today. President Trump’s appointment of Seema Verma as administrator of Centers for Medicare and Medicaid Services literally ensures dramatic changes at Medicaid. Verma, best known for her work on Medicaid issues and close ties to Vice President Mike Pence, is the architect of Indiana’s Obamacare Medicaid expansion model, known as Healthy Indiana Plan 2.0. While no formal plan has been announced, Trump is promising to give state governors the resources and flexibility they need with Medicaid to make sure no one is left out. Our guess is that big pharma won’t be left out either!
Back to President Trump’s address. While his stated goals are to increase access, lower costs and provide better health care, he also made it crystal clear that “Everything that is broken in our country can be fixed. Every problem can be solved. And every hurting family can find healing and hope.”
High drug prices are a problem (for consumers and payers) in America. Don’t doubt President Trump’s intentions to fix them. To ignore this clear promise would be folly. Since all but one major global pharmaceutical company has less than 10 percent of their sales coming from China, the world’s second largest and soon to be largest drug market, it would also be folly for global pharma not to revisit their China strategy quickly!
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