Why Higher Drug Payments in Other Countries Won't Help the U.S.

(Bloomberg) -- President Donald Trump says other countries benefit unfairly from the high prescription-drug prices paid by Americans.

But it isn’t clear how using trade deals as leverage would benefit patients in the U.S. Trump intends to propose such a step as a key plank in his plan to tackle high drug costs.

“There’s not a sensible health economist alive, or any economist, that will tell you that higher prices abroad will lead to lower prices here,” said Andrea Harris, senior vice president of health care at Height Capital Markets in Washington.

Drugmakers defend their prices by saying that research and development is a costly process and that charging what they charge for medications allows them to fund their research, pay workers and make a profit for their shareholders. Many countries in which the government is the primary payer for health care put direct limits on drug prices.

Harris said that if other policies in Trump’s blueprint succeed in bringing down prices in the U.S., pushing other countries to pay more could help ease some pressure on pharmaceutical companies -- many of which are large employers with plenty of political clout of their own.

Read more: A Bloomberg QuickTake on drug prices

Trump officials haven’t offered details on how they would force other countries to swallow higher drug costs. Health and Human Services Secretary Alex Azar said on Friday morning in an interview with Bloomberg TV that “we need to use our trade agreements and the power that the United States has to get other countries to pay more of their fair share.”

The administration will have opportunities to influence other countries to pay more, Harris said, mainly through upcoming North American Free Trade Agreement talks with Canada and Mexico, and at a World Health Organization meeting later this month.

Still, simply persuading other countries to allow drug prices to rise is unlikely to change the U.S. market all by itself.

“There’s no reason we’ll pay less in the U.S. because they pay more in England,” said Craig Garthwaite, a professor at the Kellogg School of Management at Northwestern University.

©2018 Bloomberg L.P.

Bloomberg
Stay Updated With Business News News On BloombergQuint