Donald Trump's "Big Pharma First" Agenda
Monday, May 21, 2018
By Dean Baker, Truthout | Op-Ed
Donald Trump speaks during a meeting with Jens Stoltenberg, secretary
general of the North Atlantic Treaty Organization (NATO), not pictured, in
the Cabinet Room of the White House May 17, 2018, in Washington, DC. (Photo:
Andrew Harrer-Pool / Getty Images)
After handing huge tax cuts to the country's richest people and taking away
health care insurance for millions, Donald Trump took another giant step
toward abandoning his populist agenda last week. Instead of having Medicare
negotiate to bring drug prices down, Trump put out a plan that is focused on
making foreign countries pay more for drugs.
The most immediate and direct effect of this effort, insofar as it succeeds,
will be to increase the profits of the major US drug manufacturers. This is
a high priority for all those people who own lots of stock in Pfizer and
Merck, but it is not a real goal for the other 99 percent of the country.
It's true that higher profits could lead to some additional spending on
innovation in future years. But just like the claim that the corporate tax
cut will lead to a huge flood of investment, good luck trying to find it in
the data.
It is also wrong to imagine that the other 99 percent benefit when Pfizer
and Merck can get more profits by making our trading partners pay higher
prices. First, insofar as foreigners pay Pfizer and Merck more for drugs,
they will have less money to buy US car parts or Boeing planes. Other things
equal, insofar as Trump's crusade for higher drug prices succeeds, we can
anticipate a larger trade deficit in manufactured goods. This ought to cheer
up his supporters in the industrial states.
It gets even worse. As people familiar with negotiations know, if you get
more concessions in one area, you get less in other areas. This means that
if Trump can pressure our trading partner into paying our drug companies
higher prices, he will be less able to use pressure to open doors for US
exports. This is yet another way in which he is abandoning US manufacturing
workers to increase drug company profits.
While Trump is making his Big Pharma First agenda clear, we should be
thinking more carefully about a reasonable agenda for drug prices. In this
context, we have unfortunately allowed reality to be turned on its head.
Most of the discussion proceeds as though we want the government to
intervene in the market to bring drug prices down. In fact, the reason drug
prices are high is the government has intervened by giving drug companies
patent monopolies and related forms of protection.
Without these government-granted monopolies, drugs would almost invariably
be cheap. Few drugs are expensive to manufacture. In some cases,
high-quality generic versions in India cost less than one percent of the
price of the patent-protected drug in the United States. In the free market,
drugs are cheap. It is government-imposed patent monopolies that make them
expensive.
Patents do serve the purpose of providing an incentive to innovate and
develop new drugs, but the question is whether they are the best mechanism
for this purpose. Patent monopolies mean that we are asking people who are
sick and dying to pay for research that has already been done. It's like
having the people whose house is on fire cough up the money to finance the
fire department.
It doesn't help that the payers are often third parties, like private
insurance companies or the government. In this case, we are expecting people
facing serious health problems, and/or their families, to devote their
efforts to lobbying to have the cost of their drugs covered.
There are alternatives, most obviously just paying for the research upfront.
The federal government already spends more than $30 billion a year on
biomedical research, mostly through the National Institutes of Health. While
most of this money supports basic research, the government could double or
triple this funding to finance the development and testing of new drugs.
With this policy, all new drugs could be sold as generics.
Not only would this policy give us cheap drugs, it would likely give us
better and more honest research. While the private sector could still do the
bulk of the research, a condition of getting a government contract would be
that all findings are made public as soon as practical.
This means that it would be possible to determine which drugs are best for
specific patients. For example, some drugs might be better for men than
women or be more likely to have serious side effects for some types of
people. If the test results were fully public it would be easier for doctors
to pick the best drug for their patients. It would also provide important
information to other researchers about where gaps in treatment exist, which
may not currently be recognized.
Ending patent monopoly financing would also end the incentives drug
companies now have to misrepresent the safety and effectiveness of their
products. As every Econ 101 student knows, when a government monopoly allows
a company to sell a product at a markup of 10,000 percent, it gives the
company enormous incentive to push its product, even if it means being
dishonest.
Getting beyond the patent system of financing drug research is not an
impossible leap. A bill introduced last year that was cosponsored by 17
senators, would have included funding for clinical trials, with successful
drugs then sold as generics.
The pharmaceutical industry will fight like crazy to block any efforts to
modernize the system of financing drug research. They are undoubtedly
feeling very confident now that they have a lackey in the White House, but
if people understand what is at stake, that could change quickly.
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Copyright, Truthout. May not be reprinted without permission.
Dean Baker
Dean Baker is a macroeconomist and senior economist at the Center for
Economic and Policy Research in Washington, DC, which he cofounded. He
previously worked as a senior economist at the Economic Policy Institute and
an assistant professor at Bucknell University. He is a regular Truthout
columnist and a member of Truthout's Board of Advisers.
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