Trump and Azar are rightly moving health care back to free-market policy

Trump and Azar are rightly moving health care back to free-market policy

Earlier this month, President TrumpDonald John TrumpTrump: I hope voters pay attention to Dem tactics amid Kavanaugh fight South Korea leader: North Korea agrees to take steps toward denuclearization Graham calls handling of Kavanaugh allegations 'a drive-by shooting' MORE and Health and Human Services Secretary Alex Azar unveiled the administration’s American Patients First plan to lower costs and increase access to medicines.

Importantly, this blueprint rejects the misguided approach of moving toward a socialized system of health care, which would inevitably lead to the rationing of medicines and services.

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Instead, Trump recognizes the underlying problems that are leading to higher prices and reducing access.

 

For instance, the administration is right to bring attention to foreign governments that have been freeloading off American innovation for decades, resulting in higher costs to the U.S. health-care system.

In addition, the blueprint highlights the damage that ObamaCare has caused through higher taxes and market-distorting incentives.

In his first 16 months in office, President Trump has worked to make America a more competitive place to do business. Trump has also held foreign countries that don’t play by the rules accountable through diplomacy and trade measures. 

Trump should now extend this strategy to medicines by directing U.S. Trade Representative Robert LighthizerRobert (Bob) Emmet LighthizerMcConnell urges GOP senators to call Trump about tariffs Companies brace for trade war MORE to address foreign price controls in the context of free trade agreements.

This action is long overdue. Today, the U.S. is the only free market for medicines because other countries impose blatant price controls and other regulations that forcefully lower short-term costs.

For each medicine entering the market, manufacturers spend an average of $2.6 billion and a decade conducting research and regulatory approval, according to one study. Because of excessive foreign price controls, the U.S. health-care system is forced to shoulder most of these costs and subsidize trading partners. 

America represents one-third of the market for medicines in the developed world but pays for as much as 70 percent of the costs, according to the President’s Council for Economic Advisors.

While it is a good sign that Trump is serious about pushing for better trade deals over medicines, the administration is right to recognize that importation of foreign medicines, as some in Congress have proposed, would be counteractive to the goals of lower costs and stronger competition.

While it may sound like a free market proposal, importation is actually the opposite of free trade. Importing foreign medicines would involve importing market distorting foreign price controls that would only make exacerbate the problem of other nations free-riding off of U.S. innovation.

Even if it were good policy, attempting to construct such a regulatory system for importation would be a bureaucratic nightmare and incredibly costly to taxpayers, with no way to guarantee the quality of medicines. That’s why importation has been opposed by every FDA commissioner and every HHS secretary for the past 18 years.

Trump is also right to recognize the damage that ObamaCare has caused in increasing the costs of health care through its taxes, regulations, and perverse market incentives.

When it was signed into law, ObamaCare imposed roughly one trillion dollars in new or higher taxes. The law included taxes on health insurance, medical devices, and prescription drugs — with the tax on medicines totaling $30 billion over the next decade. While these taxes are on health-care products and services, the costs are inevitably passed onto consumers.

ObamaCare also restricted the ability of 20 million families to use their Health Savings Accounts to purchase over-the counter medicines.

Rather than building on the misguided top-down, command and control model that is ObamaCare, federal health-care reforms should follow the model set by Medicare Part D by using government forces to encourage free market competition and maximize access.

Since it was created 15 years ago, Part D has come in 45 percent below projections and monthly premiums are also just half the projected amount.

Because increased access to medicines results in lower health-care costs in other ways, it is estimated that Part D has resulted in $679 billion in Medicare savings in its first nine years of existence.

In addition to lowering costs, Part D competition has also maximized access — 90 percent of seniors said they were happy with the Part D coverage according to recent polls.

President Trump’s announcement to lower drug costs is a step forward, however it is key that the administration achieves this goal through free-market policies that promote and protect competition.

By getting tough on foreign competitors that impose price controls, repealing ObamaCare taxes, and strengthening Part D, Trump has a blueprint for reducing the cost of medicines and maximizing access.

Alex Hendrie is director of tax policy at the nonprofit Americans for Tax Reform, which advocates for limited government and lower taxes.