Reducing drug costs

Did you hear that the Trump Administration has saved Americans $26 billion on prescription drugs? Probably not, and one person who seldom mentions it, oddly enough, is President Trump. A report from his own White House shows how faster approvals at the Food and Drug Administration are lowering prices.

The FDA has over 20 months of the Trump Administration approved an astounding 1,617 generic drugs, which are identical to branded versions but sold at commodity prices after patents expire. That works out to 81 a month on average — an 17 percent increase over the preceding 20 months. The Council of Economic Advisers in October tried to tally the savings from new entrants: $26 billion.

What’s remarkable is that FDA is speeding up even as fewer patents are expiring. The reason is Commissioner Scott Gottlieb’s prescriptions: clearing out an application backlog, putting priority on drugs where competition is limited, and more. The market for generics can respond to policy changes with some speed because copying a drug is much less onerous than new drug discovery and approval.

For all the talk of wondrous European health care systems, the American generics system is the envy of the world. Nine in 10 prescriptions in the U.S. are cheaper generics, which saved $265 billion last year. Compare that with 70% in Canada and less than half in many European countries. The U.S. pays big for breakthroughs but eventually prices fall as competition arrives. Europe enjoys less price discipline.

The White House also notes that “as of August 2018 the relative price of prescription drugs was lower than in December 2016,” which is a dose of reality to anecdotes about skyrocketing costs. Important too is the point that patients also “save” from expensive new therapies in the form of extended and improved lives. Affordability is an issue only if a drug exists.

No past Administration can boast this record of lowering prices without disrupting medical innovation. Yet President Trump is threatening to blow up this progress with his fixation on importing European price controls.

Democrats want to set up a “price gouging” agency that would have roving authority to investigate and fine drug companies that are behaving in ways Democrats don’t like. Their model is the Consumer Financial Protection Bureau. Then again, Mr. Trump has rolled out his own demagoguery at pharma executives. The Administration’s record reveals that the better treatment is more competition.

The Wall Street Journal

Nov. 19

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