International price index for medicine will harm patients

President TrumpDonald TrumpMyPillow CEO to pull ads from Fox News Haaland, Native American leaders press for Indigenous land protections Simone Biles, Vince Lombardi and the courage to walk away MORE was elected on his promise to stop other nations from taking advantage of the United States. Our allies let us pay for most of their own national defense needs. Treaties allowed once poor countries to hit American products with tariffs and trade barriers. The Paris agreement on climate change burdened our manufacturers and workers, while letting China and India build and expand without such onerous restrictions.

Trump highlighted that nations steal our intellectual property through piracy and use their monopoly power as a buyer to force our innovative drug industry to sell American products at cut rate prices or have their patents stripped. This is extortion plain and simple. Trump is right to fight to reform all these abuses of our generous nature. But in one of these fights the administration is talking about surrendering instead. The administration recently proposed an international pricing index for the calculation of physician administered drugs under Medicare Part B.


Instead of fighting for American exports and fair prices that respect our investment of billions of dollars in research and development of new lifesaving drugs, the plan would import socialist style price controls. This is failed policy dating back to the Roman Empire and beyond. The Medicare Part B system is based off market pricing in which costs are calculated through a formula that accounts for the “average sales price” in the United States, which also includes the discounts negotiated between hospitals and insurers. This system has been proven to work, as prices of top Medicare Part B drugs fell by 0.8 percent, while Amgen lowered the cost of an innovative cholesterol drug by over 60 percent.

In contrast, other nations freely use market distorting price controls and other heavy handed government policies within their health systems. There is no negotiation with foreign governments forcing manufactures to accept artificially lower prices in a “take it or leave it” proposition. While these policies lower costs in the short term, in the long term they ration access to important medicines, suppress the development of the next generation of cures, and ultimately increase the costs of global health.

Adopting these policies threatens the role of the United States as the leader in medical innovation. This innovative environment is enormously beneficial to Americans and to the economy, as well as the efficiency of our health system in the long run. This is no exaggeration. An estimated $90 billion is spent on research and development of medicines in the United States each year, which creates thousands of high paying jobs.

As a result, a majority of new medicines are developed in the United States and are often launched here years before other developed nations have access to them. In fact, the United States had access to 95 percent of the dozens of cancer drugs launched between 2011 and 2018. By comparison, Britain had access to 74 percent, Japan had access to 49 percent, and Greece had access to 8 percent of these cancer drugs.

The proposed international pricing index of the administration will undermine this success and cause future damage to our overall health system and to American innovation, a fact that the White House Council Economic Advisers warned of in a report published earlier this year: “If the United States had adopted the centralized drug pricing policy in other developed nations 20 years ago, then the world may not have highly valuable treatments for diseases that required significant investment.”

Supporters of the international pricing index have claimed the rule is a free market proposal that will incentivize manufacturers to negotiate better deals. However, this assumes countries now have an incentive to let manufacturers get a better deal and that manufacturers did not negotiate the best outcome already. In reality, there is nothing “free market” about this system, which is why the proposal mirrors legislation released by Bernie SandersBernie SandersDemocrats say they have the votes to advance .5T budget measure Millennial momentum means trouble for the GOP Briahna Joy Gray: White House thinks extending student loan pause is a 'bad look' MORE. The Democratic senator has also supported allowing the unchecked importation of foreign price controlled medicines into the United States. This would in fact be the importation of the socialist policy of price controls and leads to important unsafe and untested drugs.

While the international pricing index is concerning on its merits, the plan is being administered through the Center for Medicare and Medicaid Innovation, an agency established under ObamaCare that some scholars say acts in violation of the Constitution. As a result, the agency is exempt from the legislative appropriations process and is prone to being used as a tool for the executive branch of government to usurp the role of Congress in setting policy. It will harm both patients and providers.

Utilizing the federal agency to push the international pricing index opens the door to future efforts by the left to dramatically expand government control over our health system through the Center for Medicare and Medicaid. Although the administration is right to focus on efforts on lowering drug costs, the international pricing index will not achieve this goal. Instead, the proposal will adopt foreign socialized health care policies to the detriment of the American people and the economy.

Grover Norquist is founder and president of Americans for Tax Reform. Alexander Hendrie is director of tax policy at Americans for Tax Reform.