There's a Better Way to Lower Drug Prices Than Price Controls
The White House recently announced its “Great Healthcare Plan,” detailing how President Trump plans to lower drug prices for Americans by calling on Congress to codify his most-favored-nation (MFN) proposal for prescription medications.
The President is absolutely right that Americans are paying far too much for healthcare. However, importing European-style price controls is not the medicine patients actually need. There are other free-market reforms that can actually lower costs and broaden access without attacking the free market.
The White House and Congress are correct that it is far past time to take decisive action to bring healthcare costs down. However, the MFN proposal will only create a larger crisis for the very people it is meant to protect.
Rather than targeting innovative pharmaceutical companies and weakening America’s position as the global leader in medical research and innovation, Washington must refocus its efforts on the real, systemic drivers of patient distress: the widespread abuses by massive hospital systems under the 340B program and insurance companies that rake in immense subsidies while leaving families to face the highest premiums and copays in history.
Unfortunately, our family is all too familiar with the challenges posed by insurance companies. Our youngest daughter had complications during her birth and lives with Cerebral Palsy. As we’ve advocated for our daughter’s care, we dived into medical research and many of the treatments that produced positive change in our daughter were all "experimental" and non-mainstream medical treatments that insurance wouldn’t even cover. What good is insurance if you don’t actually have access to life-altering treatments and cures?
Our family came out of pocket and financially sacrificed a lot to help improve the life of our daughter. We are not wealthy by any means, but we made the sacrifice to put our daughter’s needs first. The roles of medical innovation and emerging treatments have drastically improved the quality of life for our daughter.
Sadly, many insurance companies are focused on restricting access to emerging treatments. Our daughter is now thriving because of new and emerging treatments that have ensured my daughter experiences a more productive life as she lives with daily health challenges. The good news is she's made tremendous strides over the past few years that would not have been possible without emerging treatments—all of which came because of innovation along with research and development.
While the President’s most-favored-nation price control is intended to drop prescription drug prices to the lowest level paid by member countries of the Organization for Economic Co-operation and Development. It is true that the U.S. pays nearly triple what other developed nations pay for the same prescription medications. However, applying artificial pressure to our own medical innovators is a dangerous band-aid that ignores how the system is actually rigged against patients.
Policymakers must address the root causes of why American patients pay more—namely, corporate middlemen like pharmacy benefit managers (PBMs) inflating prices at the pharmacy counter to maximize their own bottom lines, and foreign countries free-riding on American innovation without paying their fair share.
Closer to home, the 340B Drug Pricing Program has allowed massive hospitals and insurance providers to game the system, maximizing their corporate profits at the direct expense of patient dignity and care. Today, hundreds of wealthy urban hospitals have reclassified themselves as "rural" simply to pocket lucrative tax breaks. Worse, unchecked large-scale mergers mean that more than 90% of hospital beds now belong to corporate healthcare monopolies. This consolidation has caused the cost of everyday care to skyrocket, transforming what should be a community service into an aggressive corporate machine.
What should cost an insured patient less than $100 for emergency care now routinely averages well over $10,000. Corporate care providers get away with this because insurance conglomerates now act as their own PBMs, pharmacies, hospitals, and specialty financial institutions. In many states, hospitals and clinics receive billions in taxpayer support, only to divert half of those funds to third-party administrators.
The 340B program has existed for roughly three decades with essentially no guardrails on how hospitals spend these federal benefits. The result has been years of misappropriated funds.
If the administration wants to lower the cost of prescriptions dispensed by clinics, pharmacies, and insurance companies, it should reform the 340B Drug Pricing Program and let our researchers do what they do best—develop life-saving cures. Furthermore, instead of routing massive subsidies directly to insurance conglomerates, Washington should deliver those discounts directly to the patients—both in the ACA marketplace and within the 340B program.
In the long run, an MFN policy will stifle vital clinical research and development. It risks forcing American patients to rely on experimental foreign treatments or cheap, potentially unsafe foreign copycats at a time when we should be aggressively protecting American research, clinical trials, and domestic manufacturing.
Fixing the blatant abuses within the 340B program and restructuring insurance subsidies are the real solutions to our healthcare crisis—not artificial price controls that threaten medical breakthroughs and jeopardize the next great cure.
Nicole Smith is the President and Founder of the Dignity Defense Institute, a non-profit organization based in Franklin, Tennessee dedicated to upholding the inherent dignity of every human life through education, advocacy, and policy.