As the Trump administration asks the Supreme Court to dismantle the Affordable Care Act, the president has made lowering prescription drug costs the core focus of his own plan to improve the American health care system.
Responding to a question from moderator Chris Wallace during last week’s presidential debate about how the administration would replace ObamaCare, Trump shifted gears to repeat his claim that his administration’s policies will bring down drug prices 80 percent to 90 percent.
Unquestionably, the United States spends a disproportionally high amount on prescription medications. U.S. per capita spending on prescription drugs is the highest in the world. But no action the administration has taken or proposed has had a measurable impact on drug prices — let alone cut 90 cents off every dollar of spending.
During Trump’s first term, several attempts were made, such as requiring television advertisements for prescription drugs and biologic products to disclose the product’s list price. But courts have blocked these rules.
Even so, Trump has claimed successes.
At the debate in Cleveland, Trump pointed specifically to insulin, saying it’s getting “so cheap, it’s like water.” In reality, the $35 cap for insulin announced by the Centers for Medicare & Medicaid Services in May is only for certain plans that voluntarily agreed to adopt it. There is no mandate to offer this pricing and there will be a number of Medicare beneficiaries on insulin who will not get this rate.
Moreover, capping the price of insulin is not at all innovative or groundbreaking. Many private insurance companies and state plans already have implemented caps outside of Medicare and CMS.
Likewise, Trump’s Sept. 13 executive order on “most-favored-nation price” seems to be a last-minute action to get voters’ attention ahead of the election. It is not implemented yet and it may not have much real impact on overall prescription expenditure in the United States.
Higher prices in the United States for certain brand-name drugs compared to other wealthy countries has been frequently cited as an example of a broken system. Although this seems to be low-hanging fruit that could be easily addressed to bring down our prescription drug spending, the reality is far more complex.
Actual drug prices vary significantly based on negotiations between drug manufacturers, insurance companies and governments. The discounts, kickbacks, rebates and retail markups, along with the different tax structures present in each country, make it very complicated to accurately compare prices from one country to the next.
Trump’s executive order does not provide any details on how the new pricing model is going to factor in all these complexities to come up with a “most-favored nation price.” Every detail in it will be fiercely fought by Big Pharma, which has already started to push back against this order.
Even if a “most-favored nation” policy were to be implemented, the fix focuses on just one part of the much larger issue of total U.S. prescription expenditures.
A 2013 analysis from The Commonwealth Fund found that although a difference in brand name drug prices does exist between the U.S. and other OECD countries, that gap varies significant depending on the drug. When accounting for the additional markups in retail and taxes, which are typically higher in other countries, the price difference between the U.S. and other countries is less than many might imagine.
The study concluded that the price difference plays a little role in accounting for the total prescription drug expenditure in the U.S. The rest of the world may get certain drugs slightly cheaper, but the majority of the reason U.S. drug spending is so high falls on the much higher use of expensive drugs in the U.S. compared to other countries.
Any policy that is successful in bridging the price gap is not going to be effective in solving this larger, structural issue.
To fix that, we must change our behavior and choose prescription drugs that are more efficient, more appropriate and more cost effective — not the ones that are the newest, have the biggest rebates or the most marketing behind them.
One real solution that nearly every other wealthy country has adopted is a scientific body that looks not just at the clinical evidence but also the cost effectiveness of new drugs before greenlighting them for treatment. A drug that is 100 percent more expensive but only 10 percent more effective may not be worth it outside of a limited number of cases.
These solutions will require deep, structural changes to how we think about drugs, prescribe them and price them. No executive order, from any president, can do that.
Varun Vaidya, Ph.D., is a pharmacoeconomic researcher and associate professor of pharmacy practice at The University of Toledo.