How To Reduce Drug Costs for All Americans

The following is from a White House press release issued on July 31:

“REDUCING DRUG PRICES FOR AMERICANS AND TAXPAYERS: Today, President Donald J. Trump sent letters to leading pharmaceutical manufacturers outlining the steps they must take to bring down the prices of prescription drugs in the United States.”

The release goes on to detail the following steps:

• “Calling on manufacturers to provide MFN (Most-Favored-Nation) prices to every single Medicaid patient;

• Requiring manufacturers to stipulate that they will not offer other developed nations better prices for new drugs than prices offered in the United States;

• Providing manufacturers with an avenue to cut out middlemen and sell medicines directly to patients, provided they do so at a price no higher than the best price available in developed nations; and

• Using trade policy to support manufacturers in raising prices internationally provided that increased revenues abroad are reinvested directly into lowering prices for American patients and taxpayers.”

Innovation on the Chopping Block

MFN-inspired price controls could dramatically slash drugmakers’ research and development (R&D) budgets. A 2020 study found potential for up to a 90-percent drop in new medicines from small biotech firms – and nearly a million U.S. jobs gone – over just 10 years if such pricing was enforced.

The Congressional Budget Office (CBO) likewise warns that cutting manufacturer revenues leads to fewer treatments and diminished access. So, while the U.S. might flirt with lower prices, the global impact could be devastating.

Loud on Talk, Weak on Delivery

The White House letters demand steep changes, but industry insiders say the proposals are fuzzy at best. Experts point to vague enforcement, legal snags, and little clarity on actual implementation. Letters to manufacturers offer deadlines and threats, but with minimal tangible pressure, this could amount to more bark than bite.

Easy to Game the System

A neat trick: companies could artificially raise prices overseas via secret rebate deals, making the benchmark look high while real prices stay low. That means U.S. consumers may pay more, not less, for the illusion of fair pricing.

Plus, many healthcare systems abroad hide negotiated prices behind confidentiality walls, making accurate comparisons almost useless.

Where Did My Medicine Go?

With pressure to match low prices elsewhere, some manufacturers may simply yank their products from less profitable markets, or delay launches altogether, to avoid dragging down global revenue. This isn’t just hypothetical; it’s a reality that could leave underdeveloped countries and their desperate patients without essential treatments.

International Access Put on the Back Burner

While focusing solely on U.S. prices, policymakers may overlook the ripple effects worldwide. If drug companies retreat from price-sensitive regions to protect profits, many patients in poorer nations could lose access to cutting-edge therapies – even those they desperately need.

What would be a more workable alternative?  Here are some straightforward steps the government could take:

Empower Medicare to Negotiate Directly: As under the Inflation Reduction Act, giving a giant bargaining voice to Medicare – without tying price floors to international secrets – provides real leverage without global fallout.

Boost Transparency: No more hush-hush rebates. Patients and policymakers deserve to know the real cost of drugs.

Subsidize R&D or Support Public Innovation: If private incentives shrink, governments could offset the gap with targeted research funding.

As my wife and I recently enrolled in Medicare, I definitely like the idea of Medicare negotiating drug prices.

Here’s to hoping for reducing the cost of drugs for all Americans.