STEPHEN MOORE: Trump can make foreign nations pay their fair share for medicine
NEWYou can now listen to Fox News articles!
The United States spends more per capita on health care than any other country in the world. There are many reasons for this, including health insurance companies. But one reason is largely ignored: Foreign governments maintain pricing systems that limit what they pay for drugs. The difference was absorbed in the United States, with the result that Americans bear a disproportionate share of the world’s drug costs.
These pharmaceutical pricing systems need to be called trade distortions. And the Trump administration should treat these distortions the same way it treats other trade distortions: starting with investigations of discriminatory measures, using remedies available under U.S. trade law.
Countries such as Germany, France and Japan impose government pricing mandates, mandatory rebates and strict market controls that limit what they pay for drugs to well below U.S. market prices. This puts manufacturers in a difficult situation. They can either accept the penal conditions set by these countries or ensure that their products are excluded from these countries.
HHS SEC ROBERT F KENNEDY Jr: AMERICAN PATIENTS PAY MORE, OTHERS MAY PAY LESS – THIS STOPS NOW
Disabled Male Patient Sitting in a Wheelchair Being Vaccinated by a Female Doctor at His Home (iStock)
Predictably, manufacturers accepted the terms, and as a result, the United States was forced to bear a larger share of global research and development costs. These costs are included in the prices paid by American patients.
Recent developments in Germany show how quickly this dynamic is accelerating. In April, the German government presented a comprehensive cost-containment proposal. The plan would expand mandatory rebates tied to public insurance growth, tighten price-volume rules with automatic increases triggered by sales, and allow selective contracts across all classes of patented drugs.
The practical effect is to further compress pricing and limit reimbursement to the lowest-cost option within a category. Now France, Japan and Switzerland are taking similar approaches. This is a broader trend among the U.S.’s major trading partners, and Americans will once again take credit for it.
Countries that maintain these distorted pricing systems often characterize them as nothing more than domestic health policy designed to contain costs and improve budget discipline. But when governments impose controls on prices below levels that would prevail in a market-based system, they reduce the global incomes that support innovation. They also shift the recovery of costs to markets that do not impose these restrictions. The United States has become this market.
These policies amount to non-tariff trade barriers and can be resolved through U.S. trade law. There is one precaution in particular.
Close-up of man pouring capsules from a pill bottle into his hand. Senior man taking daily medicine to consume. Close-up of male hands taking daily dose of medicine. (iStock)
Section 301 of the Trade Act of 1974 authorizes the United States to investigate and respond to practices of foreign governments that are unreasonable or discriminatory and that restrict or restrict U.S. commerce. It has been applied to a wide range of non-tariff barriers, including intellectual property regimes and digital services taxes. Drug pricing systems that suppress global incomes and shift costs onto American consumers clearly fit into this framework and warrant official scrutiny.
It is time for drug pricing to be addressed as a core issue in trade negotiations. And the Trump administration is moving in that direction. Voluntary Most Favored Nation pricing regulations aim to rebalance what American patients pay without imposing domestic price controls. The administration is reportedly considering Section 301 action, which signals a growing willingness to go beyond merely local enforcement. This can’t happen anytime soon.
America’s trading partners should be pressed to adopt more balanced approaches that reflect a more equitable distribution of pharmaceutical development costs. A Section 301 investigation will establish the evidentiary basis needed to achieve this outcome and signal that the status quo is no longer acceptable.
Senior man with medicine in palm (iStock)
CLICK TO DOWNLOAD FOX NEWS APPLICATION
There is also broad public support for the action. Recent polls show that a majority of Americans believe other countries should pay a fairer share for drugs. This sentiment reflects a fundamental principle. A system where a single country constantly supports global innovation is not sustainable.
For decades, the United States has been a leader in pharmaceutical innovation that has improved the lives of millions of people around the world. But there is no guarantee that this will continue. And that may not be possible if U.S. companies are forced to subsidize innovation. Now is the time for the Trump administration to use the tools available to redress the balance and help ensure continued pharmaceutical innovation.
To read more from Stephen Moore, click here
