On Thursday, October 3, President Trump signed an Executive Order (EO) that will bring more flexibility and versatility to Medicare Advantage (MA) plans and will provide more choices for beneficiaries.  Some changes will also apply to Fee for Service (FFS) Medicare beneficiaries, to the extent permitted by law.

The president made the announcement about the EO before an audience of senior citizens in The Villages, Florida.  He started out by rightfully condemning the Democratic efforts to implement Sen. Bernie Sanders’ (D-Vt.) plan of “Medicare for All.”  He accurately described what would happen if America should adopt such a system:

"Medicare for All would not only hurt America's seniors, it would also eliminate health choices for all Americans.  Instead of picking the health insurance that best meets their needs, Americans would generally be subject to a single, Government-run system.  Private insurance for traditional health services, upon which millions of Americans depend, would be prohibited.  States would be hindered from offering the types of insurance that work best for their citizens.  The Secretary of Health and Human Services (Secretary) would have the authority to control and approve health expenditures; such a system could create, among other problems, delays for patients in receiving needed care.  To pay for this system, the Federal Government would compel Americans to pay more in taxes.  No one -- neither seniors nor any American -- would have the same options to choose their health coverage as they do now.”

President Trump said he would protect and improve Medicare instead.  His speech laid out the changes he expects Health and Human Services (HHS) Secretary Alex Azar and Centers for Medicare and Medicaid Services (CMS) Administrator Seema Verma to implement.  Most of these changes will be done through the rule making process that allows input from stake holders and the American people.

These changes include:

• Provide more choices for seniors, such as by reducing barriers to obtaining Medicare Medical Savings Accounts;
• Enable providers to spend more time with their patients, such as by eliminating burdensome regulatory billing requirements;
• Bring more innovated products to patients faster, such as by streamlining the Food and Drug Administration (FDA) approval and CMS coverage and coding processes;
• Ensure that Medicare payments and policies encourage competition and a diversity of sites for patients to access care;
• Eliminate waste, fraud, and abuse to protect beneficiaries and taxpayers and find ways to bring more market-based, competitive pricing in FFS Medicare; and
• Maximize freedom for Medicare patients by revising the rules that would preserve Social Security retirement benefits for seniors who do not want to receive care under Medicare Part A and other administrative improvements to the Medicare enrollment process.

The president clearly recognizes that it is much better to “protect and improve Medicare by building on those aspects of the program that work well, including the market-based approaches in the current system.”  For this and more, his effort to enhance Medicare is commendable.

But then he went 180 degrees in the other direction when he discussed ways to bring down drug costs.  He announced that our country would “soon allow the safe and legal importation of prescription drugs from other countries, including the country of Canada” where prices are lower for the same drug.

It is true Canadians, as do citizens in other countries, pay less for their drugs.  This happens because their government uses price controls in their socialistic, single-payer healthcare systems.  As a result, other countries have miniscule biopharmaceutical research and development and less access to innovative drugs.  Canada, as do other countries, free-ride and rely on the drug research paid for by Americans.

It is unlikely the Canadian government will allow mass exportation of their drugs to U.S. markets due to shortage concerns. However, opening up our system to importing drugs from Canada and other countries would also encourage unscrupulous characters to produce and sell dangerous, counterfeit drugs to unsuspecting citizens as CAGW has discussed at length here, here, and here.

In May 2019, the president proposed plans to utilize an International Pricing Index for Medicare Part B drugs.  Adopting price controls always distorts markets.  Just as pushing down on one side of a balloon pushes up the other side, so is it with price controls.  No doubt that phenomenon is occurring in our country as government-run drug plans are already under price controls, from the VA, to Medicaid, to Medicare Part B, to the 340B drug discount program.  Price controls have even creeped into the coverage gap, or donut hole, in Medicare Part D, which utilizes private-sector plans that negotiate drug prices and compete for beneficiaries' business.  Perverse incentives, thanks to government interference in Medicare Part D, are now helping to drive up costs.

The way to bring down drug prices is faster FDA approvals for brand and generic drugs to encourage more competition.  Better trade deals that protect U.S. biopharmaceutical intellectual property from compulsory licensing (stealing patents) would give U.S. pharmaceutical companies the leverage to demand prices from other countries to help pay for our research, instead of free riding.

More government interference in pharmaceutical pricing has not lowered prices in the U.S.  If we continue down the road of adopting socialistic-style pricing schemes, it will not be long before our biopharmaceutical research and development is as puny as those seen in other countries.  Then who will invent the next cures for Alzheimer’s or cancer?