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Trump Will Reduce Prescription Drug Prices | Newsmax.com

President Trump announced during his State of the Union address that one of his greatest priorities is to reduce the price of prescription drugs.
This is a topic that I have written about many times before, but in a limited fashion. Considering President Trump’s specific call to this issue, I thought a more thorough explanation of how he can make this possible is appropriate. In this article, we’ll explore how public and private influences in the prescription drug marketplace can have a significant impact on the price of prescription drugs.

The first and most likely public policy to reduce the price of prescription drugs would be to increase the rate at which generic drugs make it to the market.

There is empirical evidence that shows the price of a drug goes down when a generic alternative is introduced into the marketplace. This effect is increased exponentially when a third or even fourth generic alternative is made available. By getting generic drugs to the market faster, either through shorter brand name protection periods or shorter trial periods, we could see significant savings for the American people. The likely counterpoint to this policy change is that it will reduce the incentive for pharmaceutical companies to innovate and create new drugs. This issue could be quelled by providing faster paths for name brand drugs to enter the market, effectively shortening the trial-to-market turnover rate.

One idea that could reduce the cost of name brand prescription drugs would be to allow American citizens to import drugs from other countries.

Currently, many brand named drugs are more expensive in the United States because other countries negotiate their prices on a national scale. This circumstance effectively means that Americans are subsidizing the price of drugs in other countries by paying the higher cost domestically. If the safe and legal importation of prescription drugs was permitted, it would force the price down in the U.S. while increasing the price abroad. This would be a fair way to distribute the cost of name brand drugs. I call this a “favorable interest clause” where market conditions would force drug companies to offer drugs in the U.S. at the same price they are offered abroad. Consider how it would be discriminatory to offer something like a house at a price to one party but offer it at a higher price to another party. Prices need to be set by what both parties will bear.

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Trump Will Reduce Prescription Drug Prices | Newsmax.com.