Citizens Against Government Waste (CAGW), as well as other free-market, taxpayer advocacy groups, are waiting to see if the Trump administration will announce a dangerous, new policy when it comes to drug pricing.  The policy would adopt price controls for drugs in Medicare, a 180° reversal of the spectacular work the administration has been implementing to move decision-making power out of Washington, D.C. and to the states and citizens.  It could be announced today or early next week.

The policy is called the International Pricing Index (IPI).  The idea was introduced in October 2018 as an Announcement of a Proposed Rule Making (ANPRM) and at that time, the proposal would use European-style price-controlled drug costs for Medicare Part B drugs.  These types of drugs are purchased and administered by physicians in their offices or in outpatient offices.

The proposal at that time would establish a price for a Part B drug based on a mix of international prices from 14 countries, including nations such Canada, England, Greece, Italy, and Japan.  Representatives in the administration argued that the proposal could cause countries to pay more for drugs because, if U.S.-based research drug companies “don’t agree to prices demanded by foreign governments,” they “don’t have to do business there or can negotiate a price more in line with what Americans pay.”

CAGW thought that was an interesting theory, but since there is no incentive for other countries to pay more for their drugs, why would they?  After all, they routinely deny their citizens access to innovative drugs.  A Galen Institute report by Doug Badger, “Examination of International Drug Pricing Policies in Selected Countries Shows Prevalent Government Control over Pricing and Restrictions on Access,” pointed out that of all the new therapies introduced between 2011 and 2018, 89% are available to Americans, compared with 62% in Germany and 60% in the United Kingdom.  In Australia, Canada, France, and Japan, one-half or more of these innovative therapies are unavailable for their citizens.

More likely, without strong trade protections, countries would be incentivized to steal U.S. patents and manufacture their own.

CAGW submitted a comment to the Center for Medicare and Medicaid Services (CMS) on November 16, 2018, calling the IPI “a deeply flawed proposal that has been pushed by many politicians in an erroneous effort to drive down drug costs” and that it “would run contrary to the deregulatory achievements of the Trump administration, which have saved $23 billion from 176 actions in fiscal year 2018.  Indeed, it could undermine this impressive progress by reversing the growth of government controls over industry and the economy that were rampant throughout the Obama administration.”

It is true that other countries pay less for their drugs.  They utilize price controls in their socialist, single-payer healthcare systems where their government makes the decisions on the kind of healthcare their citizens will receive.  Rationing and long wait times for procedures are not uncommon.

CAGW understands the concern over drug costs, but the President’s own Council of Economic Advisers has offered coherent and better ways to bring down drug costs.  For example, recognizing that other countries free ride on our research and development, the administration should craft better trade deals that “appropriately reward innovation, rather than disproportionately putting that burden on American patients and taxpayers.”  This should be pursued, with a special interest on protecting intellectual property.

The Council also called for reducing the cost of innovation by reforming the Food and Drug Administration by improving priority review, accelerated review, fast track designation, and breakthrough therapy.

Whether the new proposal will be changed is unclear.  There have been rumors the IPI could extend to Part D drugs, which would be severely damaging to our robust biopharmaceutical research and development.

Adopting these policies would validate socialized medicine schemes like price controls and rationing, which is the opposite of what the Trump administration has been advocating for healthcare.

Let’s hope clearer heads prevail and the IPI dies a merciful death.