Last Friday, with the usual ballyhoo, the WhIte House announced that President Donald Trump would announce his long-delayed plans to reduce the costs of prescription drugs. When Trump began speaking at 2:08 p.m., stock prices on Standard & Poor's pharmaceutical sector dropped. By the time he finished speaking, the sector was soaring.
Big Pharma was very happy with Trump's speech. It contained nothing that will threaten its enormous profits nor anything that will slow down relentless price increases. As president-elect, Trump accused drug companies of "getting away with murder." As president, Trump has become an accessory to that murder.
It was yet another broken populist campaign promise, joining "great health care," putting coal miners back to work, a trillion-dollar infrastructure plan and more. Trump has kept his promise to crack down on immigrants, but the economic populism has proved to be a mirage.
Of course that doesn't mean he won't try to fool people into thinking otherwise: "Everyone involved in the broken system - the drugmakers, insurance companies, distributors, pharmacy benefit managers and many others - contribute to the problem," Trump said. "Government has also been part of the problem because previous leaders turned a blind eye to this incredible abuse."
All of that is true, but the one key to dealing with the problem is to recognize that everything stems from the upfront price that drugmakers charge and there's no way to keep them honest.
Medicare accounts for more than a third of the $360 billion spent on prescription drugs each year. But when Congress passed the Part D drug benefit in 2003, Big Pharma lobbyists wanted Medicare treated like any other customer.
Congress caved. The Department of Veterans Affairs was allowed to negotiate prices, but not Medicare. As a result, the VA spends 80 percent less for the same drugs.
Trump knows that. "We're the largest buyer of drugs in the world, and yet we don't bid properly," he said shortly before his inauguration. Since then he's been captured by the same lobbyists that he used to scorn.
Nor will he allow U.S. citizens to buy drugs from Canada, where they are often 75 percent cheaper. Trump said he'd negotiate with other countries to make them pay more to take some of the burden off the U.S., thereby getting the solution 180 degrees wrong.
Trump chose to blame the "middlemen," including pharmacy benefits managers like Express Scripts of St. Louis. How worried are investors that Trump will take serious action? Express Scripts stock rose 2.6 percent after Trump's announcement.
There's only one way to fix this problem: Use the government's buying clout to bring down prices. Eventually economics will force Congress and the president to do this. It just won't be this president and this Congress.
REPRINTED FROM THE ST LOUIS POST DISPATCH
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