Harrop: Drugmakers raise prices because we don’t haggle

By Froma Harrop

Syndicated columnist

Drugmakers rang in the new year by raising prices on hundreds of products; American prices, that is. Americans focused on the celebrations weren’t paying attention.

Allergan led the parade, hiking its prices by 10 percent on more than two dozen drugs. But note this: It didn’t raise the price of Botox, the anti-wrinkle treatment. Why? Because most users of Botox pay for it out of pocket. They can say, “I’m not bearing the extra freight. I think I’ll go another few months with crow’s-feet.”

Markets in which buyers and sellers haggle can bring reason to prices. Pharmaceuticals are special because when deemed essential to medical treatment, insurance covers them. The patient doesn’t get the full bill. Who pays? The people buying the insurance, whether private or government. That means employers pay, other buyers of private coverage pay and the taxpayers pay. There’s little in the way of a market check.

That’s why other governments have taken it upon themselves to negotiate the prices their people will pay for drugs. With a few exceptions, our government does not.

Thus, a prescription for the much-advertised Humira, which treats psoriatic arthritis, costs only an average of $822 in Switzerland but $2,669 here.

The 2003 Medicare drug benefit — that is, the creation of Medicare Part D — was a product of George W. Bush’s administration and a Republican Congress. It specifically forbade the government to negotiate drug prices for Medicare. The drug plans in Part D do temper prices somewhat, but Medicare, with its giant market, could do a lot better.

Donald Trump the candidate backed letting Medicare negotiate with drugmakers, an excellent idea. Trump the president promptly dropped it. And whom did he name as the secretary of health and human services but Alex Azar, a former top executive at Eli Lilly.

After the drugmakers’ New Year’s Eve price heist, both Trump and Azar expressed their displeasure in tweets. Does anyone remember them?

Last fall, Trump announced a project whereby Medicare Part B would use an “international pricing index” as a benchmark for setting prices for medications. Part B covers drugs administered by doctors and hospitals.

The idea could have promise. But it wasn’t announced until right before the midterm elections and hasn’t been talked about much since. Not a good sign.

Several states are taking the matter into their own hands. Vermont, for instance, is considering a program that would enable its residents to buy cheaper drugs from Canada. Olympia Snowe, a former Republican senator from Maine, made this a trademark proposal for addressing the high cost of drugs.

What these schemes have in common with Trump’s “international pricing index” is that they ask other countries to do the price bargaining for America. They pass the buck, our bucks.

The drug companies say that if Americans don’t cough up what they demand, they can’t afford the research to develop wonderful new products. In truth, drugmakers on average spend only 17 percent of their budgets on research and development. And nearly every new drug approved by the Food and Drug Administration started in research in government or university labs. The taxpayers made the investment, and Wall Street took the profits.

Even if we accept the industry’s argument, the question must be asked. If high prices are necessary for the development of wonderful new drugs, why are Americans the only people paying them? Doesn’t that make Americans truly the world’s suckers?

This is a Trumpian concept. Sadly, when it comes to addressing the exorbitant prices Americans pay for their drugs, Trump talks a far bigger game than he plays. We could be in for a surprise, but with a former Big Pharma executive running the HHS, don’t bet on it.

Follow Froma Harrop on Twitter @FromaHarrop. Email her at fharrop@gmail.com.