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Trump Is Wrong – Americans Should Be Paying More For Their Drugs Than Other Nations

It’s possible to perceive an unfairness in the manner in which retail prices for pharmaceutical drugs are higher in the US than they are in many other nations. This is largely because the US government denies itself the power to demand lower prices from the drug companies. And boy, don’t those progressives whine about this non-application of the power of the Federal government. The thing is, if you actually were a progressive, one concerned with the richer carrying a heavier burden of society than the poorer, you’d be all in favour of Americans paying those higher drug prices. That progressives aren’t just shows us the logical consistency of the movement.

Still, that does mean that Trump is wrong here:

President Donald Trump and his top health official will launch a criticism of foreign governments that pay less than the U.S. for some widely used drugs, part of an exploration of changes to how the federal government pays for pharmaceuticals.

The U.S. Medicare program pays almost twice as much for certain drugs as other countries with similar economies, according to a report released Thursday by Health and Human Services Secretary Alex Azar. Trump has made the differences a major issue as part of his wider focus on trade.

This is freeloading, indeed it is, and it’s righteous and just freeloading too. If you’re a progressive that is:

This action, again by progressive lights, is thus wrong:

President Donald Trump on Thursday will unveil a plan to overhaul how Medicare pays for certain drugs, attacking “foreign freeloaders” that he says have driven up costs in the U.S. The bold move addresses a Trump campaign pledge to lower drug prices, just days before the tightly contested midterm elections in which health care is playing a pivotal role.

Here’s our background problem. Working out which drugs work and how is expensive. There’s then another expensive in actually proving this well enough to gain a licence. All in costs are in the $1 to $2 billion range dependent upon who you want to listen to. Unfortunately, once you’ve done all that and paid all that anyone could just come along and copy your drug. Which means you don’t make your $2 billion back – that in turn meaning that no one does spend $2 billion, we don’t get new drugs and we all die in ditches.

This is a classic public goods problem and the solution we use – not the only one, not even the only viable one – is patents. You get about 10 years, the time between approval and patent expiry, to make your $2 billion back. Then anyone can copy it and we all get cheap copy drugs.

For this system to work it is not necessary that everyone pay these high patent protected prices. There’s no point in trying to charge some farm worker in S Africa $10,000 a year for HIV retrovirals anyway, they don’t have the cash and demanding it will gain nothing except their death. We just need some group to pay the high prices so that drug development still happens. Everyone else can get drugs at some margin above their manufacturing, not development, costs.

So, who is it who should be carrying this cost of producing this public good? Good progressive principles tell us that it should be the rich folk. Imagine that we used some other system of drug development, maybe taxpayers cough up for it all. It’ll still be the rich doing the paying, right? So, patents, where the rich pay full freight for drugs, the poor don’t, this meets our equity criterion.

And who are the rich in this global sense, for we’re talking about a global public good here? That would be the citizens of the richest large nation, the largest rich nation, the United States of America. So, yes, Americans should be paying high prices for drugs and the rest of us shouldn’t.

Do note that we’ve used impeccable redistributionist logic to reach this conclusion. It’s only if you think the rich shouldn’t be paying to benefit the poor that this is a bad idea. Which might be why Trump is agin it but it still puzzles as to why the progressives would be.

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Rhoda Klapp
Rhoda Klapp
5 years ago

No mention of the amount drug companies spend on lobbyists? $875k per congressman, I heard. My insulin cost 35 times in the US what it costs in India, but only 24 times the UK price. Insulin isn’t new. They change it every so often in an apparent method of keeping the patents going. The market doesn’t work and it looks like the FDA is a big part of the problem. This post doesn’t get near describing the problem.

5 years ago

There’s an upfront cost to be recovered. Half of this is extremely expensive research labs. The other half is getting FDA approval, which does appear to be unduly onerous, though that has yet to be established as fact not newspaper fiction. Wouldn’t it be luvverly if the FDA was not an American institution but global, and any facility in any country could apply to be licensed. Once approved by the Outer Mongolian franchisee, a drug would not need to be retested for use in Murrica or Britland. Here in Sunny South Africa we have only the most rudimentary screening for… Read more »

Richard M
Richard M
5 years ago

“The U.S. Medicare program pays almost twice as much for certain drugs as other countries with similar economies” While anyone with any empathy at all should not have a problem with poor people in really poor countries paying less for medications the above statement (if true) shows what is really being seen as the problem. Personally I am OK with the pharmaceutical companies charging all the market will bear. I am also OK with the insurance companies and Medicare telling them no we will only pay “this” much. If nobody buys at the price the pharmaceutical companies want then they… Read more »

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