. . . are hot to set price controls on U.S. pharmaceutical drugs, President Trump is trying to do just that.
Maybe you should vote for him.
Here's the story:
President Trump has ordered Medicare to pay no more for prescription drugs than a basket of industrialized countries pay for the same drugs. National Public Radio describes his plan this way:
The most radical order involves requiring Medicare to pay the same price for some drugs—the ones patients receive in the hospital as part of Medicare Part B—that other countries pay.
President Trump knows that most other countries—perhaps all—have price controls on pharmaceutical drugs. This is what progressives and socialists do, when given half a chance. They want free stuff.
This sets up a two-tier price system. Patients in the United States pay full price. Patients elsewhere get a price discount. Makes sense, does it not, for Americans get the same price break?
Actually not.
It costs and arm and a leg to develop a new drug from a standing start. Companies can spend billions on the research, trials, and regulatory costs.
When the drug comes to market, the price needs to cover at least three things. First, the R&D (research and development) costs of creating the new drug, conducting trials, and getting regulatory approval. (Companies also need to recover the costs of failed drug projects.) Second, they must recover the ordinary costs of making the pills, distributing them, and retailing them. Third, they need a profit for taking the risks and doing the work. Not getting a profit means they have no incentive to invent new stuff.
Patients in the United States pay prices that reflect all three elements of cost. In return, they benefit from the most vibrant pharmaceutical industry on earth. New drugs appear regularly. They prevent or treat illnesses of all sorts. Our ancestors paid for the absence of these drugs the hard way, by enduring worse health and shorter lifespans. We pay for them with money.
Other countries are free riders on this system. They impose price controls that cover the costs of manufacture and distribution, but refuse to reimburse a full share of the R&D costs or, of course, profits. As a result, foreign patients usually get their meds at a lower cost than U.S. patients.
The price controls in Freeriderstan must, by definition, cover the operational costs of manufacture, distribution, and sale, plus at least a modest profit. The trick, of course, is that the regulated prices typically pay little or none of the R&D costs. The foreigners are happy to let drug companies recover those costs back in the good-old U.S.A.
Why does Big Pharma go along with this manifestly unfair system? Because a little profit on operational costs is better than no profit at all. And because refusing to sell at lower prices would create a market for the companies in China, India, and elsewhere that know how to reverse-engineer the pills and get them to market, illegally, at a fraction of the U.S. price.
This perverse and unfair system backloads all R&D costs on the United States. Through higher prices, you and I pay for inventing these miracle drugs and getting them through trials and to market. The rest of the world contributes little or nothing.
President Trump wants the United States to get in on the scam. He wants to piggyback Medicare prices on the regulated prices from overseas. Why not? Sounds fair.
President Trump is trying to impose backdoor price controls. It's unwise. It's immoral. But it may be legal.
Politically, you on the left need to stand and applaud. President Trump is doing what you say you want done. I'm just asking you to be consistent and support him in his, and your, misguided quest for free stuff.
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