Trump's free market approach to drug pricing will help lower costs

During President TrumpDonald John TrumpTrump mocks wind power: 'When the wind doesn't blow, just turn off the television' Pentagon investigator probing whether acting chief boosted former employer Boeing Trump blasts McCain, bemoans not getting 'thank you' for funeral MORE’s State of the Union speech, he spoke about the urgent need to lower prescription drug prices. He talked about global freeloading and the injustice of Americans paying more for drugs that are made here than foreign countries do. He discussed the need for price transparency, where drug manufacturers reveal their list prices on television ads and elsewhere. The president also discussed the need for legislation that ensures drug discounts are transferred directly to the consumer.

Under the current system, middle managers, like pharmacy benefit managers and insurers negotiate prices with the drug companies.

What should we do?

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I am not one who favors big government solutions such as Medicare for All, which could negotiate drug prices across the board. This approach might lower prices, but would likely stifle innovation and decrease accessible options for my patients at a time of great advances in cancer immunotherapy treatments, surgical and radiological techniques.

Instead, I agree with the Trump administration’s free market approach. The FDA under Commissioner Scott Gottlieb has been approving more generic and biosimilar drugs at an unprecedented rate.

Dr. Gottlieb told me in a recent interview that he expects there to be an exorbitant rise in insulin prices because of more biosimilar drugs developing within the next few years. These new drugs will increase competition and lead to lower more affordable prices. 

When it comes to rebates, President Trump’s proposal to remove so-called “safe harbor” protections which drug manufacturers offer to PBMs is important, especially if cost savings are truly transferred to the patient as planned. 

My sick patients deserve the rebates, not the profit-seeking middleman. The current proposal will only apply to Medicare Part D and Medicaid managed care plans under the direction of Health and Human Services, but could be extended by legislation. 

Price transparency sheds a spotlight on the price problem, which include  the rate of increase for drug company list prices and the expanded Center for Medicare and Medicaid Services drug dashboards.

Two bills passed last fall: Patient Right to Know Drug Prices Act and the Know the Lowest Price Act. Both of these removed pharmacy gag clauses, which stopped pharmacists from telling customers if prescriptions would cost less if they paid out of pocket rather than using their insurance. This enables my patients to make more informed, cost-saving decisions.

Another Trump proposal aimed at increasing price transparency involves directing pharmaceutical companies to include list prices in their TV ads to consumers.

Some experts are concerned that high prices might scare patients away unnecessarily, especially when the high prices flash across the screen, but as a practicing internist, I don’t agree. My patients want to know what their medicines cost, even if their insurance ends up covering it. In fact it is “price opacity” that has enabled health costs to soar, while patients are blinded and continue in a bubble of expectation based on the high premiums they pay. 

The Trump administration and HHS should be applauded for their efforts to extend and expand price transparency. Johnson & Johnson just became the first drug company to comply with the TV ad proposal, as they will include the list price for their most widely prescribed medication, the blood thinner Xarelto (used to treat blood clots and help prevent strokes) which costs $450 to $540 per month.

This price will flash across the screen at the end of every commercial for the drug and J & J is considering expanding this practice to other drugs.

Finally, there is the concern about what President Trump has called “global freeloading.” During his State of the Union Address, President Trump suggested a new policy which would “allow Medicare to determine the price it pays for certain drugs based on the cheaper prices paid by other nations.”

These price controls may help to bring down Medicare drug prices. Another approach I favor would be to place export taxes on drugs manufactured here to make sure that negotiated prices by foreign governments are in keeping with what my patients or their insurances are paying. 

There is some evidence that the Trump administration’s approach is already having an impact, with growth in prescription spending beginning to slow and out of pocket spending for drugs remaining flat.

But that’s still far from enough, especially when you consider the exorbitantly expensive new immunotherapies and personalized treatments coming down the pike. One out of four patients already have a difficult time affording their medicines, and the problem is only going to get worse.

The ultimate solution is to be found in the free market, with government guidance, not government overreach. Americans want access to the latest and greatest treatments and will rebel against rationing or long waiting times as in Canada. The question is how can we as a country continue to best afford to pay for our emerging biotechology. 

One thing is for sure: My patients deserve the best prices for their life-saving treatments, especially if they are manufactured here at home.

Marc Siegel, M.D., is a professor of medicine and medical director of Doctor Radio at NYU Langone Health. He is a Fox News medical correspondent.