“Drug prices declined in 2018, the first time in nearly half a century. During the first 19 months of my Administration, Americans saved $26 Billion on prescription drugs. Our policies to get cheaper generic drugs to market are working!”
— President Trump, in a tweet, Jan. 11, 2019
This article has been updated
This is an interesting tweet by the president because it can be read two ways — either the sentences are distinct statements or they are intended to flow together to make one point.
The consumer price index for prescription drugs fell by 0.6 percent for the 12 months ending in December, according to the Bureau of Labor Statistics. The decline would be the first time in 46 years in the December-to-December time frame, but there have been other 12-month periods with index declines, mostly recently in 2013.
The president’s second sentence has a big number in it — $26 billion — and appears related to the price decline mentioned in the first sentence. But it’s not related! We will explain below.
The third sentence could be viewed as an opinion. But it also could be considered an explanation for the numbers that preceded it.
We are going to focus on the $26 billion number and whether the president’s use of it is misleading.
Trump wrote: “During the first 19 months of my Administration, Americans saved $26 Billion on prescription drugs.”
He pulled this number from a report issued in October by his Council of Economic Advisers (CEA), which found that “relative annual price growth for prescription drugs has slowed since January 2017.” That means prices are still going up but at a lower rate than before. The report includes a chart with a trend line of expected prices, based on the second half of President Barack Obama’s term. (Note: an earlier version of this article incorrectly said that there was a spike in prescription drug prices because a new drugs to deal with hepatitis C. There was a spike in spending because such drugs entered the market.)
The $26 billion figure actually refers to the savings from the introduction of all new generic drugs in the first 19 months of the Trump administration (if you count all of January, though the president did not take office until the 20th). The analysis was based on an earlier report by the Food and Drug Administration that looked mainly at drug approvals in 2017. Contrary to the president’s tweet, it is not a figure for all prescription drugs; it just reflects the impact of generic-drug introductions.
The Trump administration has made it less costly for companies to apply for generic approvals. The FDA says it set a record for generic approvals in fiscal year 2018 (September through October), 781, breaking the record of 763 set in the previous fiscal year.
“We find that 17 percent more generic drugs have been approved each month, on average, since January 2017 than were approved during the previous 20-month period," the CEA report said. "Furthermore, we find that this increase in approvals has taken place despite the fact that the number of brand name drug patent expirations—necessary precursors for generic entry—has declined during this period.”
The Obama administration also made efforts to speed up approvals. So an unknown number of these drugs would have come on the market no matter who was president.
The CEA calculation of $26 billion assumes the savings relative to a world in which no generic drugs came onto the market. So it’s a valid number, but Trump can’t claim all of the credit.
“As the CEA report makes clear, large numbers of generic drugs entered the market in every year leading up to 2017 and that surely would have continued no matter what the administration had done,” said Matthew Fiedler of the Brookings Institution, the CEA’s chief economist in the Obama administration. He said the methodology was reasonable, but it is “not a remotely plausible estimate of the savings generated by the administration’s policies.”
“The $26 billion in savings is likely disproportionately accounted for by the initial round of generic entry that occurs when a high-revenue brand-name drug comes off patent,” Fiedler said. “These markets are so large and so lucrative to enter that incremental changes in the mechanics of the FDA approval process like those the administration has implemented so far, while potentially worthwhile, are unlikely to have a big effect on entry decisions.”
The CEA report argues otherwise, saying “prices continue to decline substantially as the number of generic competitors increases.”
Meanwhile, an Associated Press investigation found that brand-name prescription prices keep going up, with 96 price hikes for every price cut. But a simple count may not be especially helpful in determining what happened to the prices of prescription drugs that were most commonly used by consumers.
The White House initially did not offer an on-the-record comment. After this fact check was published, a CEA spokesperson said: “The new data and our research show that the Administration’s efforts to make medicines more affordable are showing promising results, but of course the President believes there is more work to do.”
The Pinocchio Test
As we noted, one could view the tweet as three distinct sentences — two facts and an opinion. But we believe most people would read it as a continuum: Prescription drug prices have declined, here’s how much money you saved, and thus our policies are working. But the $26 billion number refers to the savings from the introduction of all generic drugs, most of which would have happened no matter who was president.
So the number, while apparently accurate, was incorrectly described and lacks context. The president earns Two Pinocchios.
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