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Drug Companies Can Lower Prices or Have Trump Lower Them for Them
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When President Trump talked on the campaign trail about reducing regulations, Washington yawned. Presidents, especially Republicans, were always promising this and never delivering.

But 2018 saw fewer regulations initiated and fewer pages added to the Federal Register than any year since such records have been kept.

When Trump talked about cutting taxes and putting people back to work — it again was written off as boring stuff Republican presidential candidates always say. Only, he backed it up with a tax reform bill that cut rates dramatically for individuals and corporations, spurred business spending and led to 50-year lows for overall unemployment and best-ever stats for employment among African-Americans, Latinos, and women.

He talked about eliminating ISIS, and a caravan pulled out on Wednesday from the final 1.4 square miles ISIS controls. He talked about moving the U.S. embassy in Israel to Jerusalem, and the new embassy opened four months later.

He’s talking now about lowering drug prices, and drug companies better be ready to respond.

Already, his Justice Department is investigating possible generic drug-price fixing, his Department of Health and Human Services is releasing memoranda, white papers and policy statements on how to contain drug prices, and his administration already has proposed pegging Medicare Part B prices to an international pricing index.

The president threatened last year to remove safe harbor exemption for rebates negotiated between pharmacy benefit managers — the companies that manage pharmaceutical benefits and plans; payers and drug manufacturers. He is insisting on transparency, which would spell death for these arrangements and remove a downward pressure on drug prices.

Another emerging issue is a provision the drug industry snuck into the U.S.-Mexico-Canada Agreement (USMCA) that will “give pharmaceutical companies 10 years’ protection from cheaper competition in a category of ultra-expensive drugs called biologics, which are made from living cells.” This trade provision hikes Canada’s and Mexico’s patent terms and locks in U.S. law at 10 years for some of the most expensive drugs in the world.

And this time, he has Congress on his side — at least as far as agreeing the problem needs immediate attention.

Sen. Bernie Sanders, I-Vt., and Rep. Elijah Cummings, D-Md., both on the far left, introduced legislation that would subject far more medicines to international pricing indexes, allow direct purchase of medicines from Canada and other countries and permit the government to negotiate directly with drug manufacturers for bulk deals for Part D patients.

On Tuesday, the Senate Finance Committee will hold its second hearing on “Drug Pricing in America: A Prescription for Change.” The first was an eye-opener.

One witness, Mark Miller of the Laura and John Arnold Foundation, told the panel the U.S. government spent $471 billion on prescription drugs for Medicaid and Medicare patients in 2016 and is expected to spend $584 billion next year — a 20 percent hike. Some medications, he said, can cost $50,000 a year or more, and those without employer-provided health insurance pay, on average, 27 percent of that cost — which would be $13,500.

No wonder a quarter of Americans say they did not fill a prescription last year because of cost.

Drug manufacturers have dodged efforts to force pricing accountability into the market place for years by claiming the high cost of research and development of high-end drugs leads to the higher prices, Miller said. Americans pay more because America subsidizes drug research for the rest of the world and thus gets access to the newest, most effective treatments before anyone else.

But, as Miller pointed out, from 2013 to 2017, the top five drug companies in America spent more on marketing and administrative costs than on research and development.

Moreover, Miller said, Food and Drug Administration policies encourage drug firms to hold on to their patents as long as possible, fight efforts to make generics or biosimilars available and other anticompetitive tactics.

Miller told the panel that from 2005 to 2015, three-quarters of new drug patents were for drugs already on the market, and of the 100 best-selling drugs, 80 percent were on their second patents and half were on their third or more patents.

Of the 12 best-selling drugs in the U.S., drug companies filed 125 patents during that period, and 71 were granted, he said.

Others have been accused of bribing makers of generic drugs to keep them off the market.

In other words, companies are refining current products — often with little benefit for patients — and engaging in other anti-competitive behavior just to extend the period for which they are covered by patents and protected from market price pressures. The Federal Trade Commission tries to monitor and punish these activities, but usually the fines don’t come close to covering the profits already made, Miller said.

Trump said last month he wants to make reducing drug prices a top priority of his administration. “Prices will come down,” he said in his State of the Union speech.

If drug companies are smart, they will take him at his word, get out in front of this and lower prices on their own. Otherwise, there is legislation already pending in both houses of Congress to do it for them in ways they will find far more painful.

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