By Dr. Merrill Matthews Institute for Policy Innovation.
Republican presidential candidate Donald Trump who at one time backed lots of Democratic policies--including creating a single-payer health care system and a mandate to have coverage--has found another one he likes: Requiring prescription drug companies to negotiate with the government to determine prices for the Medicare prescription drug program.
Of course in health care the federal government doesnt negotiate prices; it sets prices otherwise known as price controls.
For example the government tells doctors and hospitals what it will pay for services delivered to Medicare and Medicaid patients. That proclivity to impose price controls is one reason why Congress included a non-interference clause in the 2003 legislation creating the Medicare prescription drug benefit. Lawmakers wanted a firewall between the market for drugs and government regulators.
If Trump becomes president he wants to tear down that firewall and allow the government to tell drug companies at what price they will be allowed to sell their products to the government.
But that will only be the beginning. Medicare and Medicaid are such large programs that the governments dictated price for health care services becomes the
de facto benchmark price that everyone else wants. Thats especially true for Medicaid which by federal law must receive the lowest drug price available.
But history has shown the process doesnt stop with price controls. Once the government thinks it has squeezed all of the blood out of the top of the turnip it begins squeezing it from the bottom--by requiring drug companies to pay Medicaid rebates to the government.
Trump has a long history of using government to achieve his goals if he thinks the ends--i.e. his profits--justify the means. Think of his use of and support for eminent domain.
But imposing price controls on prescription drugs doesnt actually address the challenges we face trying to ensure a balance between innovator drug companies that need the freedom and economic incentives to create the next generation of prescription drugs and the patients need for access to affordable (when insurance is included) drugs.
According to
the Institute for Policy Innovations calculations drug companies spend about $1.756 billion per newly approved drug. We need creative market-oriented solutions to ensure those costs can be covered and the products sold at a reasonable price (when compared to other similar therapies).
Trumps only solution is to slap on government-imposed price controls.
