On the campaign trail, Donald Trump vigorously advocated for Medicare price negotiations. But so far, his biggest policy proposal, which arrived Monday, merely suggests that the government require pharmaceutical companies (many of which, for disclosure, I have personally invested in) to show list prices in their TV advertisements. For some reason, it does not require such pricing information for radio, newspaper or magazine advertisements.
Who could be against such price transparency? Indeed, few doctors and patients have any idea about the true prices of medical services, drugs, devices, imaging procedures or anything else. Providing price information is widely viewed as a good thing.
But let’s not confuse a positive step toward price transparency with an effective policy to reduce drug prices. Putting list prices on TV ads will not lower drug prices. And it may have some troublesome side effects. It also lacks an enforcement mechanism, such as steep fines.
How is showing drugs’ list prices supposed to work? Part of the Trump administration’s theory seems to be that by shaming drug companies they might lower their prices. But nothing seems to shame them. Indeed, after all the uproar over $600 EpiPens, EpiPens are, well, still $600.
Perhaps the administration wants to encourage competition and give patients more information to shop for lower-priced drugs and generics. But for many expensive prescription drugs, there are no generics or competing brand-name drugs due to patent protection. And even in cases where there is competition, patients typically do not decide which brand of a drug they are prescribed; doctors and pharmacy benefit managers do.
It is always dangerous — and a bit worrisome — to agree with the drug companies, but two arguments they raise against President Trump’s policy have validity.
First, list prices for drugs are misleading and possibly useless. The actual price that Americans pay is almost always much lower. For instance, a friend of mine with metastatic prostate cancer was prescribed Johnson & Johnson’s Zytiga, with a list price of about $12,500 per month. Shopping around the Internet, patients can find the drug for about $10,500 per month, and with insurance, many pay as little as $2,500 per month. But because my friend has generous insurance for this particular class of drugs, he only pays $50 per month (though J&J will still make more than $10,000 per month, because the insurance company picks up the tab and raises premiums to do so). Just putting the list price out there is likely to confuse people about what they will actually pay.
Second, drug companies argue, high list prices on TV might deter people from seeking treatment they need. These concerns are not entirely theoretical, as data show that some patients do not fill prescriptions when their chemotherapy drugs have high prices and high co-pays.
The pharmaceutical industry’s solution, however, may be even sillier — and more disingenuous — than the administration’s. It wants to flash a website on TV ads so patients can find out more about drug prices online. But how many people will take the time to go to those websites? And can we trust that pricing information online won’t be confusing to the ordinary American? Wasn’t it Trump who once remarked on how confusing the health-care system was?
If lowering drug prices is the goal, we need to understand the problem to devise an effective solution. The problem is that through patents and FDA marketing exclusivity, the government grants monopolies to drug companies. And the companies use that monopoly power to sell drugs at exorbitant prices.
Although the specific policies differ in detail, every other developed country negotiates drug prices with a threat that if there is no agreement, companies won’t be allowed to sell their products. If we want lower drug prices, we’ll need similar policies.
A good place to start is the proposal from Rep. Lloyd Doggett (D-Tex.), which has attracted 100 co-sponsors, that would require the Health and Human Services secretary to negotiate prices of prescription drugs paid for by Medicare Part D. If negotiations reach a stalemate, the secretary would have to issue licenses to other companies to make cheaper generics. The bill could be enhanced by expanding it to national drug price negotiations, covering the 160 million Americans who have private insurance.
As Winston Churchill once said: “You can always count on Americans to do the right thing — after they have tried everything else.” It seems as if we will try the Trump administration’s hollow — maybe even counterproductive — policies to lower drug prices, such as listing them in TV ads, before we finally get around to real reform on drug prices.