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Trump's Socialist Health-Care Scheme


Trump’s Socialist Health-Care Scheme



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The biopharmaceutical industry saves more lives, relieves more suffering, and reinvests more profits into innovation than any other in the world. Yet the sector has become a public punching bag. Everyone from liberal Democrats to President Trump argues that drugs cost too much.

The problem is that “lowering drug prices” has different meanings to different people. If the goal is to help patients afford their medicine, a set of rational policy choices could help. If the goal is to stick it to pharma and help insurance companies and the government save money, then the Trump administration is on the right track—only it will come at the expense of innovation, cures, patients and jobs.

Last week Mr. Trump embraced a “foreign reference” pricing scheme for medicines covered under Medicare Part B, which includes new biotechnology breakthroughs. If implemented, what the U.S. government is willing to pay for these lifesaving drugs will be determined in part by the prices paid in Greece, a bankrupt socialist state with single-payer health care.

As word of the president’s impending announcement hit Wall Street last Wednesday, the Nasdaq Biotechnology Index plunged 6.3%—its worst day in seven years. It was a sad day for the entrepreneurs and scientists who have worked to make the precision-medicine revolution a reality.

Betting on new biologic medicines is one of the biggest long shots on Wall Street. Less than 10% of research-and-development programs lead to commercialized medicines. But the returns of a few successes are high enough to fuel the cycle of innovation-delivering gene-therapy cures, immuno-oncology treatments and other breakthroughs. A stream of next-generation advances are filling the development pipeline, making now an especially foolish time to shrink the reward.

America’s unique market-driven system has allowed U.S. companies to develop more medicines than the rest of the world combined. If the U.S. adopts socialist price controls, it also will have to accept the lower levels of innovation found abroad. This means closed biotech startups, productivity losses and higher hospitalization costs. More than 25 million Americans suffer from nearly 7,000 rare diseases, and many could see their hopes of ever getting better fade away.

The Department of Health and Human Services study that was used to justify the new policy primarily references single-payer health systems, which use their considerable leverage to override market forces and say “take it or leave it” when negotiating the price of medicines. That’s why U.S. patients can use 90% of new drugs, while only two thirds are available in the United Kingdom and 50% in France and Canada.

The administration’s announcement on foreign price controls came only 10 weeks after HHS lifted a longstanding prohibition on step therapy in Medicare Part B. Starting in January, lucrative Medicare Advantage plans can start requiring patients prescribed biologic drugs to “fail first” on older, cheaper drugs before their plan covers the newer medicine. This proposal can indeed lower patients’ drug bills—to zero—by denying them access to medicine they need as their health deteriorates. The real costs being lowered here, though, are those of private insurance companies that administer the Medicare benefit.

The administration also announced that it may require pharmaceutical television ads to feature a drug’s list price. But that fee is a starting point for negotiations between drugmakers and payers. It does not represent what patients or insurance companies actually pay or what drug companies earn. Not even close. Forcing disclosure will make many patients believe they cannot afford the breakthrough drugs—and therefore avoid seeking them. This, again, will save insurers money.

Entrenched interests within the health-care system play politics when they conflate out-of-pocket costs for patients with drug costs paid by public and private payers. The cumulative effect of recent drug pricing announcements is that payers and other middlemen win. Patients who are hurting don’t get significant relief, while the investors and innovators who make the medicines get a gut punch.

Tying U.S. drug costs to what Finland and Slovakia pay is a remedy worse than the underlying ailment. To bend the cost curve, focus on what works: harnessing market competition and rewarding innovation that cures disease and lowers health-care costs. Hopefully the voices of innovators, investors and patient advocates can yet convince the president that there is a better deal to be made.

Mr. Greenwood is CEO of the Biotechnology Innovation Organization. He represented Pennsylvania’s Eighth Congressional District, 1993-2005.



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