Americans pay the highest prescription drug prices in the developed world, and President Trump wants to do something about it. The instinct for parity is a feature of Trump’s approach to politics. Since returning to office, the president has advocated a “most favored nation” approach to drug pricing, pegging what Americans pay to the lowest price charged in other wealthy countries. The policy itself would, however, import the very price controls that explain why Europe hasn’t produced a breakthrough drug pipeline in a generation.
The administration’s rationale is simple enough: why should Americans be on the hook for higher costs when patients across Europe, backed by socialist healthcare models, often pay far less?
The answer isn’t politically attractive—it’s about trade-offs and short-term versus long-term benefits.
In much of Europe, Australia, and Canada, drug prices are set through centralized negotiation, and drugs are rationed through reimbursement rules. The end result is that patient access to cutting-edge drugs is restricted and often very much delayed. A German might get a new treatment 60 days after it hits the American market, while a Romanian waits 1,201 days. Obviously, this means life or death for certain patients abroad who will get the drugs cheaper, yet too late.
If the president still wants Americans to be at the front of the line for cutting-edge drugs, he can’t at the same time embrace socialist-coded European policies that slow access.
Just weeks ago, the FDA granted expedited approvals for a critical drug, allowing children as young as 2 years old to receive gene therapy to treat sickle-cell disease. Because the United States is the home of medical innovation, American children will be among the first to use this and other emerging treatments. In countries that use “most favored nation” drug pricing, kids in a similar situation might wait years for the same privilege.
The president plays into the left’s hands by making the issue all about “fairness” in terms of dollars and cents, when he should instead be hyping how good Americans have it compared to the rest of the world.
A recent analysis found that while 85 percent of new medicines launch in the U.S., only 24 percent reach Australian patients and are publicly reimbursed. For medicines that Australians are lucky enough to access, the average “patient access gap” wait time is just under two years. The U.S. healthcare system certainly has its problems, but trading America’s level of access for Australia’s would be foolhardy.
Yes, drug prices in America need to come down, but imposing prices via a top-down approach will only delay Americans’ access to cutting-edge treatments.
Americans do, in fact, pay too much for drugs: RAND’s international comparisons found that, in general, U.S. prices are nearly three times higher on average than those in peer countries. When it comes to brand-name drugs, the story is even worse.
What’s the solution?
First, deal with the middleman when it comes to purchasing drugs: pharmacy benefit managers (PBMs). They negotiate drug benefits on behalf of insurers and employers, but are typically paid a percentage of the drug’s list price, which ultimately increases the prices consumers pay. This means PBMs have an incentive to steer patients toward higher-priced drugs even when cheaper ones are available.
If PBMs were paid through a fixed payment model, they would not have that same incentive structure, and experts estimate this could lower prices by up to 15 percent.
Second, the FDA should issue approvals as efficiently as possible to bring more drugs to market and increase competition. This has been a major stumbling block for the administration, which in part led to the ouster of Marty Makary as FDA commissioner.
America can’t afford to lose its standing as the home of medical innovation.
Yes, Americans want lower drug prices, but not at the cost of rationing and delays. President Trump has rightly said that socialism is dangerous, but importing “most favored nation” drug pricing takes a page out of the socialist healthcare system playbook.
Let’s focus on real solutions that will keep America at the forefront of global medical innovation while lowering costs for patients.
Jay Goldberg is the North American Affairs Manager at the Consumer Choice Center