Don't Reward Foreign Freeloading on U.S. Drugs. End It.

The Trump Administration unveiled a new proposal today for a pilot project that would link the prices the federal government pays for Medicare Part B prescription drugs to an international index, but the nonpartisan National Taxpayers Union (NTU) is warning that American taxpayers and patients would ironically bear painful burdens for this attempt to end foreign "freeloading." NTU President Pete Sepp offered the following statement:

The Trump Administration is right to call out freeloading foreign nations whose price-control policies allow them to take advantage of U.S. drug discoveries that our patients and taxpayers disproportionately finance. The proposal to create an “international price index,” however, merely reflects many of the harmful practices pioneered by those same “freeloading” foreign nations. It is difficult to see how creating this index and requiring U.S. prices to gradually meet those of other nations will force these countries to any bargaining table. Instead, the index and ratchet mechanism will encourage them to wait out the U.S.'s self-imposed price clampdowns or encourage those nations to exercise even tighter controls over their own payment policies. Either way, for the prospect of some short-term savings, American taxpayers lose over the longer term. If the U.S. government tries to force price restrictions, vital funding for new drug developments that could replace costlier surgeries and other therapies in government health programs will dry up. On the other hand, if foreign countries simply continue or accelerate their own price controls, Americans' share of worldwide drug expenses will only rise. Like importation and other ill-advised schemes, government manipulation of markets often leads to costly and tragic results. The President's own Council of Economic Advisers (CEA) made an important point in a report released earlier this week on the negative experience of socialist countries that have attempted "through a monopoly government health insurer ... [to] centrally set all prices paid to suppliers." CEA is absolutely right, and our own government should avoid too closely tying part of our health care system to the policies of other countries that have yet to break out of the "monopoly government health insurer" mindset.

This ill-advised “international price index” scheme is not the answer. The Administration can and should fulfill its laudable goal of reducing foreign freeloading on U.S. pharmaceuticals by curbing unnecessary regulations on development and approval, instituting outcome-based rather than dosage-based reimbursement policies, and conducting smart trade negotiations that remove other countries' artificial price barriers. In doing so, it will demonstrate U.S. leadership on a vital issue.