Trump's Drug-Price Plan Is A Dud

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ICYMI

Stocks slept. David Tepper might buy the Panthers. Bitcoin faces the dreaded Death Cross.

Drugmakers Can Breathe Easier

U.S. prescription-drug prices are outrageous. This is so obvious it offers rare common ground for people on both sides of the political divide. One of President Donald Trump’s most effective 2016 pitches was his pledge to do something about it.

But the plan Trump announced today avoided big moves and tough decisions, Max Nisen writes. For example, he could have fulfilled a campaign pledge to have the government negotiate prices on behalf of patients. Instead, his plan proposes modest tweaks to Medicare Part D. That’s better than nothing, but a missed opportunity for bigger savings. 

Other proposals similarly nibble at the problem. None match the tough rhetoric Trump aimed at everyone from drugmakers to “middle men” and foreigners who don’t have to pay exorbitant prices for American-made drugs.

Here’s the stock-price action of one “middle man,” Express Scripts Holding Co., a pharmacy benefit manager:

That price collapse marks when Trump started complaining about “middle men” in his speech today. The recovery marks when Trump stopped talking and investors realized nothing truly awful was going to happen to them. Shares of other PBMs and drugmakers also finished the day higher.

Joe Nocera argues there’s already a great drug-price-slashing tool lying around, if anybody wants to sharpen it and start swinging: the 34-year-old Hatch-Waxman Act. This law set time limits on patent protections and encouraged new generic drugs. It worked for about 20 years, Joe says. But then, naturally, companies learned to get around it, with “patent fortresses” and other shenanigans. Joe suggests some simple updates to the law could solve many problems.

Austin Frakt proposes having the nonprofit Institute for Clinical and Economic Review analyze new drugs to figure out their true value. That would be a guideline for drugmakers and payers to agree on a semi-reasonable price. 

These are all great ideas! They weren’t in the president’s plan. 

The Bloomberg View

Malaysians just overcame massive “gerrymandering, nativist appeals, a muzzled press and concerted efforts to depress the vote” to throw out their country’s ruling coalition for the first time in 60 years. It’s time to restore the country’s institutions and give voters the real change they obviously want, Bloomberg’s editors write.

Middle East Meddling

Iraq holds parliamentary elections this weekend. But their outcome won’t be decided until much later, thanks to the huge mess U.S. and Iranian meddling made of Iraq’s political system, warns Hussein Ibish.

Messing with Iraq has been a rare area of agreement for the U.S. and Iran for the past 65 years. For most of that time, the U.S. has been either messing with Iran or dealing with the blowback, writes Pankaj Mishra. Trump’s nuclear-deal gambit is just the latest episode.

Don’t Go Russian In

Joe Nocera takes a deep dive into one man’s nightmarish experience working with a Russian company:

“The story I’m about to tell is one of those tales that make you wonder why anybody does business in Russia. It’s a country that really doesn’t play by anybody’s rules but its own.”

Watergate’s Grim Lesson

Democrats don’t want to think about the dark side of Watergate’s legacy, but they must, warns Sam Tanenhaus. History may see Richard Nixon’s defenestration as a triumph of the rule of law, but many conservatives never stopped stewing about it, considering it an undemocratic negation of a landslide election. Many won’t let Trump suffer the same fate so easily.

Chart Attack

Banks have been cutting their rainy-day funds because obviously it will never rain again, Stephen Gandel writes.

Speed Round

We need a better, scarier, more descriptive term for anthropogenic climate change than “anthropogenic climate change.” – Faye Flam

If you want gun makers to change their ways, then you could a) buy a bunch of shares in them and try to use your miniscule new leverage to force them to change. Or you could b) take the Occam’s Razor approach and not do that – Matt Levine (sign up for Matt’s newsletter here)

The first step to better investing is admitting what you don’t know. – Barry Ritholtz (sign up for Barry’s newsletter here)

It’s been two years. Maybe it’s time for the UK to figure out what “Brexit” really means? – Therese Raphael

Who’s been right on China so far? Not Maoists, not Western liberals. It’s Karl Marx. – Tyler Cowen

Kickers

Space needs a traffic cop. American baby names have a lot of vowels lately. In Bolivia’s navy, you can sail zero seas.

Corrections: Yesterday’s letter misspelled “invitations” and forgot the link to Justin Fox’s story on lumber tariffs.

Note: Please send drugs, suggestions and kicker ideas to Mark Gongloff at mgongloff1@bloomberg.net.

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