Do you recall the time when Donald Trump, the Republican presidential candidate, questioned Kamala Harris’ ability to manage prices? It was just last August, a bit back in the past.
During a campaign rally in Pennsylvania, Trump told the crowd, “In her speech yesterday, Kamala has become a total communist… She wants to destroy our country. After causing devastating inflation, Kamala announces she wants to enact socialist price control.” His remarks were pointed, targeting her approach to food prices as well as prescription drugs.
Harris had been advocating for price management systems. Specifically, she pushed for price controls on certain high-cost medications via the Inflation Reduction Act in 2022, entering negotiations to bring prices down.
While Trump’s critiques about her role in managing food prices seem fair, it’s noteworthy that the public seemed to align with his view following the election.
Price control has been the go-to strategy for the progressive left to handle almost every economic challenge. Yet the reality is that such controls often lead to unexpected repercussions, like shortages of products or declining quality. Companies may shy away from innovating, unsure whether they can recoup costs, while a black market can emerge as people pay more for what they need.
It’s somewhat puzzling, then, to see Trump suggesting a similar approach to drug pricing. This isn’t exactly new territory for him.
During his first term, he encouraged Americans to seek “drug imports” from places like Canada, despite warnings from the FDA about potential dangers of substandard or counterfeit medications. Even Florida’s attempts at establishing import programs fell flat.
Now, Trump is advocating for a “most favored nation” drug pricing model. The details are vague, but it involves an executive order suggesting that the Secretary of Health and Human Services should promote a buying program directly from pharmaceutical manufacturers at the best prices available. A bit of a twist on the usual methods.
What’s interesting—maybe concerning—is that the reference to a “most favored nation” could imply a government-run healthcare system, which often correlates with price controls, leading to shortages and long wait times for treatments.
The aim here is to lower drug prices, as Americans generally face higher costs for branded medications compared to patients in other countries, though they pay significantly less for generics overall.
One of the key reasons for this disparity lies in the role of Pharmacy Benefit Managers. These intermediaries negotiate prices with pharmaceutical companies, but the savings rarely trickle down to patients. Many times, these managers have a substantial cut, sometimes even exceeding what Europeans pay for their medications.
It’s obvious that our system could use improvements. Mark Cuban’s venture, Cost Plus Drug Company, launched in 2022, bypasses these middlemen. Their model offers transparency around drug costs, and they negotiate directly with manufacturers. While the savings for common generics might not be huge, brand-name medications often come at significantly lower prices compared to local pharmacies.
They have a growing list of medications for various medical conditions, continuously working to expand their offerings.
Additionally, we can’t ignore how Americans essentially subsidize drug prices for the global market. Many wealthy nations impose price caps, benefiting from U.S. investments in drug development. If Trump aims to hold other countries accountable, maybe a firmer approach, similar to defense funding, should be considered.
Experiments within other systems like Cuba show that socialized pricing often leads to limited access and denial of care.
In summation, Trump seems to lean on his usual stance regarding prescription drugs, implying that no new laws or intermediaries are necessary.
