In his quest to put “America first”, the President signed an executive order earlier this month calling for Medicare to adopt a “most favored” pricing scheme where it would pay no more than the lowest price paid by developed countries (comparable per capita GDP).
“The Council of Economic Advisers has found that Americans finance much of the biopharmaceutical innovation that the world depends on, allowing foreign governments, many of which are the sole healthcare payers in their respective countries, to enjoy bargain prices for such innovations.” The executive order reports.
Trump had initially drafted an executive order in July, giving the pharmaceutical companies more than 45 days to come to the table with a better offer for US citizens--they didn’t. Instead, lobbyists for the pharmaceutical companies, such as the Pharmaceutical Research and Manufacturers of America lobby group, declared the move ‘reckless’ among other self-serving comments. The media unsurprisingly had a negative tone touting this executive order as just another campaign strategy to cull votes.
Politics aside, from a healthcare provider perspective why not pay less for drugs if we have the buying power to do so? The pharmaceutical companies argue the real problem is the value chain that steals their profit margin and consists of pharmacies, pharmacy benefit managers, and suppliers + distributors. True, but then why charge Americans more?
What about the bottom line? The top 10 pharmaceutical companies have gross margins greater than 70% and the top 35 largest pharmaceutical companies have an average net income of 14%. In the next decade, advances in biotechnology will only lower R&D and production costs.
In an ideal world, we should let the free market decide prices, but in this market, there is no competitor to a patented drug. However, this executive order only applies to the government run Medicare program. Commercial plans will have to negotiate for themselves.
This Thursday, Trump gave a few more details on how he’s going to make this a reality one way or another. The other way announced is to allow the importation of more affordable drugs from Canada! Florida Governor Ron DeSantis has already sent a request for a contractor to manage the statewide importation of more affordable drugs. It's expected to save the state of Florida more than $150 million annually. Note however biologic drugs, including insulin cannot be imported safely at this time. Trump released an RFP asking private companies to find a solution. More states are joining Florida.
If you read the media and comments from lobbying groups, they dub this as a major threat to public health from potential counterfeit drugs which technically exist both in the US and in Canada (and can be solved with blockchain based tracking of drugs). Additionally, the Canadian government has concerns over limited supply for Canadian citizens. Again, if there is demand, there will be supply.
While it might seem that there are a few external forces trying to prevent this from succeeding, there are a number of healthcare organizations including the American Pharmacists Association and a large group of democrats in the house and senate who support it. We probably forgot, but in 2017 senators Bernie Sanders (I-Vt.), Cory Booker (D-N.J.) and Bob Casey (D-Pa.) introduced the Affordable and Safe Prescription Importation Act to allow importation of drugs from Canada initially and then from other international countries. This was followed by the Affordable Insulin Act of 2019, to import insulin safely. There’s at least three years worth of discussions on this, and we will continue to follow the latest developments.