Philipson: Trump’s drug-pricing pressure is working
In a significant policy shift, the White House has announced that pharmaceutical giants AstraZeneca and Pfizer will begin charging foreign health systems the same prices for newly launched treatments as they do in the United States. This move is echoed by Bristol-Myers Squibb and AbbVie, who have also committed to aligning their pricing in the United Kingdom with U.S. rates for upcoming therapies. This decision marks a notable departure from the longstanding practice where many countries, particularly in Europe, have employed various price controls to keep drug costs low, often at the expense of American consumers and taxpayers who bear a disproportionate share of the global investment in pharmaceutical research and development.
The impetus behind these pricing changes can largely be attributed to the policies advocated by President Donald Trump, who has been vocal in urging foreign governments to pay market prices for medications. His administration has positioned itself as a staunch defender of American pharmaceutical innovation, pushing back against foreign price controls that have historically allowed other nations to benefit from U.S. research without contributing their fair share. The recent announcements from these drug manufacturers signal a newfound confidence in resisting such controls, bolstered by the belief that the Trump administration will support them in their negotiations with foreign health authorities. This could lead to a paradigm shift in how global pharmaceutical pricing is structured, potentially benefiting American patients and the healthcare economy.
However, the implications of these policies extend beyond just pricing. A recent study from researchers at the University of Chicago warns that instituting price controls on existing drugs could lead to a dramatic 49% reduction in U.S. revenues for biopharmaceutical firms, resulting in a nearly 48% cut in worldwide research and development spending. This downturn could translate to approximately 500 fewer new drug approvals over the next decade, which would have dire consequences for public health and the economy. The report emphasizes that while American companies struggle to combat foreign free-riding on innovation, the federal government has the leverage to enforce fair pricing practices globally. By insisting that other developed nations match the U.S. investment in innovative drugs, the Trump administration could potentially inject billions into the drug development pipeline, ultimately benefiting not just American patients, but also the broader economy. As the administration navigates these complex issues, it must carefully consider the balance between promoting innovation and ensuring affordable access to medications for all.
https://www.youtube.com/watch?v=wymbSOt98dA
The White House just announced that AstraZeneca and Pfizer will start charging foreign health systems the same prices for all newly launched treatments as they charge here in America. Bristol-Meyers Squibb and AbbVie have similarly promised to charge the same price in the United Kingdom as in the United States for two soon-to-be-launched treatments.
President Donald Trump deserves much of the credit for these pricing decisions. For months, he has been demanding that wealthy foreign governments start paying market prices for medicines, instead of using a variety of direct and indirect price controls to suppress spending on innovative drugs — which forces American patients, employers and taxpayers to shoulder the lion’s share of the global research and development burden.
The recent announcements show that drugmakers finally feel empowered to resist foreign price controls — confident that the administration will have their backs during their upcoming, inevitably contentious pricing battles with European health bureaucrats unaccustomed to paying American prices for American-invented, often American-made medicines.
The White House would be wise to tout wins like these and continue supporting companies in their efforts to charge market prices abroad for newly introduced medicines — all while recognizing that companies have limited flexibility to renegotiate pricing contracts for drugs already on the market.
If administration officials fail to make this distinction — and cap U.S. drug prices at the artificially low levels set overseas — the results could be catastrophic for our collective health and our economy.
In a new paper, my University of Chicago colleagues and I demonstrate that such price controls on existing drugs would reduce biopharmaceutical firms’ U.S. revenues by 49%— leading to a roughly 48% cut in worldwide research and development spending. In turn, that would result in about 500 fewer new drug approvals or indications in a 10-year period.
Despite this immense harm to public health and our economy — the revenue losses alone are equivalent to 0.78% of our gross domestic product, to say nothing of the much greater losses in productivity from increased illness, premature deaths and biotech industry job losses — domestic price controls would not achieve their intended goal of ending foreign free-riding on American innovation.
Individual American companies don’t have the leverage to fix foreign free-riding on their own. But the federal government does — which is why it’s critical for the Trump administration to push other countries to pay their fair share.
He could insist that other developed countries match the 0.8% per-capita share of GDP that the U.S. spends on innovative drugs. That would curb free-riding and inject billions of dollars into the drug development pipeline, benefiting American patients, workers and the economy as a whole.
Tomas J. Philipson is an economist at the University of Chicago and served as a member and acting chairman of the president’s Council of Economic Advisers from 2017 to 2020/Tribune News Service
