Trump’s business practices could help curb the crazy high drug prices
© Getty Images

President-elect Donald TrumpDonald TrumpFormer GOP officials criticize Trump’s NATO approach Trump returns to White House after first trip abroad White House: Trump trip left no doubt 'who America’s friends are' MORE promised to bring down drug prices in his Time magazine Person of the Year interview and perhaps his unique blend of common sense and desire to make a deal might be the needed prescription. 

Americans want to see policies that address constantly increasing drug prices that are making healthcare unaffordable, risking overall healthcare, and raising the cost of doing business. Trump recognizes that past policies are failing to stem the increase in drug prices and knows action is necessary.

ADVERTISEMENT
Consumers are fed up with escalating drug costs which increased by over eight percent in 2015, much faster than other areas of healthcare. Trump made reining in drug prices a key campaign issue. The problems are complex but Trump’s signature business approaches could actually be a positive force toward curbing drug prices.

Negotiation

Trump runs his businesses based on his acumen as exemplified in his book, The Art of the Deal, promising the American people he would use those tough negotiating skills on our behalf. This may be a good sign for drug pricing where the power of negotiation is often untapped.

Take the largest single buyer of drugs — Medicare. Medicare uses a piecemeal negotiation approach. Trump has called on having Medicare negotiate directly with drug companies to aggregate buying power and drive down costs. 

The plan harnesses the massive buying power of Medicare, which presently relies on for-profit companies called Pharmacy Benefit Managers (PBMs) to negotiate. Studies show that the PBM rebate structure can inflate drug prices for the PBMs’ own profit gain. By negotiating directly, Medicare can cut out the middleman and deliver billions in savings to consumers. 

Regulatory reform

In his First 100 Days Action Plan, Trump called on the Food and Drug Administration (FDA) to do its part to inject competition in the market, saying, “Reforms will also include cutting the red tape at the FDA; there are over 4,000 drugs awaiting approval, and we especially want to speed the approval of life-saving medications.”

The backlog includes some new drugs, but delayed entry of generic drugs due to regulatory abuse is exemplified by the backlog at FDA. Trump has also expressed a desire to allow re-importation of drugs, which is currently banned under Federal regulations.

There will be an opportunity for vast regulatory reform in the first year of Trump’s presidency, when Congress takes up The Prescription Drug User Fee Act (PDUFA), a must-pass FDA bill that can serve as a vehicle to building a sensible regulatory system that enhances competition. Trump has shown that he has no problem using the bully pulpit to communicate his priorities to Congress. He should use this power to put a spotlight on these issues and pressure Congress to enact meaningful reforms. Periodic congressional attention can not cure the problem.

Competition

As a savvy businessman who had a first-hand understanding of competition, Trump has a unique opportunity to use free market principles to make the market for pharmaceutical drugs work for consumers. Trump has cited competition as a way to make health insurance markets work better, stating on his website, “By allowing full competition in this market, insurance costs will go down and consumer satisfaction will go up.” He should apply the same standard to the prescription drug sector.

Eliminating barriers to generic drugs are key. Generic drugs typically cost at least 80 percent less than their branded alternatives and saved consumers over $227 billion in 2015, according to the Generic Pharmaceutical Association (GPhA). However, there are many drugs that could have generics on the market but do not because of a variety of anticompetitive schemes by branded manufacturers.

These tactics include paying off generic firms to delay generic entry, making small changes to the product to secure an additional patent (known as product hopping), regulatory abuse (sham citizen petitions), and FDA approval issues like preventing generic firms from getting access to samples to secure regulatory approval (REMS abuse). Stronger antitrust enforcement is a first level concern and ensuring fair generic entry is critical to supporting those priorities. The problem Risk Evaluation and Mitigation Strategies (REMS) can be addressed through the Creates Act authored by Senators Mike LeeMike LeeRepublicans go to battle over pre-existing conditions Senate gears up for fight on Trump's 0B Saudi Arabia arms sale Senate feels pressure for summer healthcare vote MORE (R-Utah) and Chairman Chuck GrassleyChuck GrassleyThe case for protecting America's intelligence agency whistleblowers Senate confirms Trump's first lower-court nominee Feinstein: Comey memos 'going to be turned over' MORE (R-Iowa), which provides a sound regulatory solution.

Transparency is also essential to well-functioning, competitive markets. In response to the EpiPen crisis, Senators John McCainJohn McCainTrump got harsher GOP reception than Bush on budget Armed Services chairman unveils .1B Asia-Pacific security bill Overnight Defense: Trump scolds NATO allies over spending | Flurry of leaks worries allies | Senators rip B Army 'debacle' | Lawmakers demand hearing on Saudi arms deal MORE (R-Ariz.) and Tammy BaldwinTammy BaldwinDem senator presses Trump for combat ship funding Congressional Democrats going the wrong way on carried interest tax Dems request insider trading investigation into top Trump adviser MORE (D-Wis.) proposed the FAIR Drug Pricing Act, which would require drug companies to justify price increases above 10 percent. President Trump should put the FAIR Drug Pricing Act on the fast track for enactment.

Trump is not following the traditional playbook on many issues, but that could be exactly what we need. Simply behaving like the pushy negotiator he makes himself out to be in The Art of the Deal could result in significant benefits to consumers paying untenable increasing prices for prescription drugs.

David Balto counsels a wide variety of Fortune 500 companies, small business and consumer advocates on antitrust and consumer protection compliance, strategic alliances, distribution issues, mergers and joint ventures. He is the former Policy Director of the FTC in the Clinton Administration. Becky Davidson is a healthcare policy analyst at the Law Offices of David Balto and writes for the blog at The Coalition to Protect Patient Choice

The views expressed by contributors are their own and not the views of The Hill.