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Tags: medical | innovation | pricing

International Pricing Index: Nail In Coffin of US Medical Innovation

shopping cart full of medicine with coins in the foreground
(Dreamstime)

By Friday, 02 October 2020 02:54 PM Current | Bio | Archive

One of the most remarkable tall ships to ever sail was the HMS Dolphin – the first vessel to circumnavigate the entire globe twice. It almost didn't make it around the second time, though, because when it had weighed anchor in Tahiti, her sailors realized they could trade iron to the native girls for (ahem) companionship: so sailors started pulling nails out of the Dolphin as barter and it almost fell apart.

The sailors were so fixated on immediate gratification that they almost stranded themselves in the middle of the ocean forever. They were ready to throw away their long-term safety to feel good in the short term.

Alas this short-sightedness isn't limited to lonely sailors. We're seeing it right now in our never-ending health care debate.

Democrats have become experts at tricking people with empty promises that sound great in the short-term but would lead to long-term disaster. A phrase they've popularized to promise an endless supply of magically free medicine in the International Pricing Index (IPI), which would impose price-controls on what America pays for particular drugs to the price paid in Europe and elsewhere.

As President Trump issued a series of well-intentioned and well-crafted proposals in executive orders to address drug prices, the IPI somehow got bundled in there. As Nancy Pelosi and others saw that the president was taking steps that might (gasp) help make prescription medicine less expensive, they knew they needed to outmaneuver him so he'd have to back down. This was when the IPI entered the public vernacular.

The foreign countries against which the index would be based are those that already have their own government-set price controls. So then these prices wouldn't be set by the market, but by European and other socialist bureaucrats.

Slapping price controls on the most important drug market in the world would be devastating to the future of medical innovation. The country that produces the majority of the world's new drugs can't experiment with that kind of disruption to its business model and expect to continue to function. It would be like English sailors docked in Tahiti tearing the nails out of their ship and still expecting to somehow sail home.

No one wants to hear "We have the miracle cure to heal your child but it is very expensive," and something like price controls sound like a wonderful fix in the short term. The uncomfortable truth, however, is that if we had imposed price controls 10 or 20 years ago, those miracle cures never would have come to be. But it's very easy for mendacious Democrats like Pelosi, more interested in winning in November than actually helping people long term, to sell this – pardon the phrase – poison pill to voters.

Part of this was the president's "Most Favored Nations" order, which created a pilot program for limiting prescription medication payments made through Medicare to the lowest-rate paid in other OECD member nations. The idea is that if other nations are getting a deal from U.S. pharmaceutical companies, the U.S. deserves the same deal.

The president is right to look at other countries for calculating a healthcare policy, but this is coming at them from the wrong angle.

Rather, the president needs to use his bully-pulpit to stop European freeloaders from ripping off American drug companies at artificially depressed prices that could never sustain the onerous expense and enormous risk required to bring a new medicine to market. Other countries are not magically getting deals; they're engaged in theft with extra steps. If Europeans and others paid their fair share, American drug manufacturers could lower their prices at home.

Critics of the president's foreign policy will say that he hurts our image in the world. But they miss that the goal is not to have a good image – the objective of a president is not to go on Ellen and dance – the goal is to win. And Trump is good at winning in spite of it making him less popular: just ask our NATO allies who are at last paying their fair share.

There are better ways to lower domestic drug costs. Reduced regulation which lowers the barrier to entry would lead to more competition and lower prices. Tort reform that shields companies from exorbitant lawsuits would save consumers billions. Mandates for increased transparency would force the market to behave more like a market and less like the Byzantine maze it's become.

There are plenty of things the president can do now and in a second term to reduce the cost of healthcare. He doesn't need to play Pelosi's game. He needs to hit the nail on the head.

Jared Whitley is a long-time politico who has worked in the U.S. Congress, White House, and defense industry. He is an award-winning writer, having won best blogger in the state from the Utah Society of Professional Journalists (2018) and best columnist from Best of the West (2016). He earned his MBA from Hult International Business School in Dubai. Read Jared Whitley's reports — More Here.

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JaredWhitley
The country that produces the majority of the world's new drugs can't experiment with that kind of disruption to its business model and expect to continue to function.
medical, innovation, pricing
842
2020-54-02
Friday, 02 October 2020 02:54 PM
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