President Donald Trump has complained that U.S. drug companies are â€śgetting away with murder.â€ť For once the hyperbole is forgivable: It suggests he takes the problem of drug costs seriously and might be willing to do something about it. Unfortunately, his administrationâ€™s efforts up to now suggest the opposite.
The White House has proposed tweaks to government health-care programs. Some of these measures are worth trying -- they could help at the margin -- but tweaks arenâ€™t enough. The underlying problem is drug prices that are indeed murderous: Americans and their insurers often pay many times what people in other developed countries pay for the same medicines. Thatâ€™s what policy needs to confront.
The administration wants insurers participating in Medicareâ€™s prescription-drug program, for instance, to share more directly with beneficiaries the discounts they arrange with drug companies. Out-of-pocket drug costs for some people on Medicare would be capped, and reimbursement for medicines administered by doctors would be trimmed. In Medicaid, a handful of states would be allowed to decline coverage for certain drugs, increasing their leverage in negotiating discounts.
Such changes could lower drug spending for some Medicare and Medicaid beneficiaries. But they miss the main point by shifting costs within the health-care system rather pressing down on the costs themselves. Unless this changes, the U.S. will continue to be overcharged for its drugs.
The companies often say that high U.S. prices pay for research into new lifesaving products. Leaving aside why U.S. patients should be asked to shoulder that burden for the entire world, the evidence shows that the argument is false: The premium companies collect in the U.S. market is substantially greater than the amount they spend on research and development.
Trump is right to deplore the cost of drugs in the U.S.
- Bloomberg View