A lot happened in the 2016 campaign, but one of the things Donald Trump did to win the election was shift to the left on a number of key issues — promising to avoid cuts in Social Security and Medicare benefits and adopting a longstanding Democratic pledge to let Medicare negotiate bulk discounts in the price it pays for prescription drugs.
Today, after a meeting with pharmaceutical industry lobbyists and executives, he abandoned that pledge, referring to an idea he supported as recently as three weeks ago as a form of “price fixing” that would hurt “smaller, younger companies.” Instead of getting tough, Trump’s new plan is that he’s “going to be lowering taxes” and “getting rid of regulations.”
New drugs are generally covered by patent monopolies, so drug companies have a lot of pricing power; other companies can’t produce the same drug without paying royalties, so there’s little competition. But most countries use their nationalized health care systems to negotiate a good deal on drug prices. Manufacturing pills is cheap, so it’s usually still profitable for a company to sell medicine at a pretty steep discount.
The United States doesn’t have a nationalized health care system, but we do have Medicare for senior citizens, and since the USA is a very large country, that’s still a huge potential bulk purchaser. But a 2003 law written by congressional Republicans and signed by George W. Bush prohibits the federal government from using that negotiating power.
As recently as January 11, President-elect Trump was promising to revisit this policy.
“Pharma has a lot of lobbies, a lot of lobbyists and a lot of power. And there’s very little bidding on drugs,” he said at a press conference at Trump Tower in Manhattan. “We’re the largest buyer of drugs in the world, and yet we don’t bid properly.”
Today he apparently changed his mind. According to Herb Jackson, the designated pool reporter for the day, Trump’s new policy on prescription drugs is that drug companies should get tax cuts and deregulation (emphasis added):
I'll oppose anything that makes it harder for smaller, younger companies to take the risk of bringing their product to a vibrantly competitive market. That includes price-fixing by the biggest dog in the market, Medicare, which is what's happening. But we can increase competition and bidding wars, big time.
So what I want, we have to get lower prices, we have to get even better innovation and I want you to move your companies back into the United States. And I want you to manufacture in the United States. We're going to be lowering taxes, we're going to be getting rid of regulations that are unnecessary.
Many people watching the chaotic rollout of Trump’s executive orders on immigration, his demands for investigations into phantom vote rigging, his mysterious ties to Russia, his financial conflicts of interest, and his bizarre lies about Inauguration Day crowd size have found themselves wondering why more Republicans don’t stand up to him.
This event with PhRMA lobbyists explains why. On most of the big public policy issues of the day, Trump is a very conventional Republican. And on those issues where he hasn’t been conventional, Republican Congress members and business executives feel confident they can turn him around. On some issues, they probably won’t. But on this issue, it seems like they did.
I should acknowledge that some reporters who cover this beat don’t agree with my read of these remarks. But Trump picked an HHS Secretary who’s opposed price negotiations, and other ideologically orthodox Republicans to run Medicare and Medicaid and his Office of Management and Budget. When congressional Democrats tried to get an amendment supporting price negotiation into the senate’s budget resolution, Trump didn’t lift a finger to stop them. It seems to me that Trump is now aligning his statements with the actual policy he is pursuing, namely to speed drug approvals at the FDA and not change anything about Medicare pricing.