President Donald Trump is about to begin his push to lower drug prices. According to several reports, he's likely to sign an executive order outlining a plan by early July. The good news is that the easiest and most beneficial way to cut prices comes from something Trump likes to do already: reduce regulations.
Few industries are laden with more regulations and government-imposed delays than big pharma. Since we're talking about potentially lethal drugs here, there are obviously some good reasons for a number of those rules. But critics have long complained that some of them don't provide more safety while they add to the industry's costs and reduce competition.
According to the consensus view, the best way to reduce drug prices would be to allow Medicare to negotiate prescription drug prices in bulk. The crowd may be right as far getting an initial sticker price reduction, but price controls come with hazardous side effects like rationing, black market sales, and stifling innovation. Price controls are already in place in much of the world's single payer health care systems and the side effects have jacked up the effective cost of drugs accordingly.
As humorist P.J. O'Rourke used to say: "If you think health care is expensive now, wait until it's 'free.' "
That's where the easy choices the president can make come in. And they can all be done without Congressional approval. Here are the top three:
1) Easing the approval process for generics and biosimilars
President Trump's new FDA chief Scott Gottlieb has already been talking about speeding and easing the path to drug approvals and getting drugs to market. If that scares you into thinking about a ton of dangerous drugs suddenly hitting your pharmacy shelves, take a breath. Much of this involves getting generic brands of already known-to-be-safe drugs to market faster. Gottlieb told Congress he wants the FDA to force the big drug companies to stop hiding behind his agency's safety rules as an excuse not to cooperate more in the generic drug production process. In other words, some of those safety rules are being abused, and getting rid of them is overdue.
But a subset of the generic drug category are so-called biosimilars that don't have the exact same active ingredients as the branded drug, but produce similar results. The process for getting a biosimilar approved is tougher and longer than for a regular generic. But "tougher" is an understatement as it usually takes seven additional years for a biosimilar to be approved compared to a regular generic.
Gottlieb told Congress last month that he wants to make narrowing that gap a priority. For a series of bestselling drugs, experts say speeding the biosimilar approval process would have a major impact. That includes the arthritis drugs Humira and Remicade, and the cancer drug Avastin.
2) Remove barriers for branded drugs too
The generic and biosimilar policies Gottlieb likes and President Trump may approve won't make the big drug companies happy. A lot of their profits are connected to drugs that don't have generic competition. But there are plenty of things the administration could do that would make Big Pharma smile. And these moves would also result in drugs getting to the consumer faster.
First, the FDA should start allowing limited sales of drugs that have already passed the typical Phase I and Phase II clinical trials before they clear that final Phase III hurdle.There are still obvious dangers that can be uncovered in a drug during Phase III, but patients who are advised of the risks should have the right to try drugs at that stage. This is especially true for people already facing a terminal illness. The FDA would still reserve the right to pull the drug altogether if patients using it experience new problems.
Second, it would be beneficial for the companies and the customers if the FDA automatically approved drugs that have been cleared for sale by the European Medicines Agency, which often employs a tougher approval process than the FDA.
Finally, you've probably noticed that drug companies spend a lot of time and money these days on sophisticated marketing and advertising. They also still send drug sales reps to doctors' offices across the country hoping to educate them on their drugs and boost prescriptions.
One of the reasons for these frantic and expensive efforts is the fact that while a drug is in the clinical testing process, there's a ban on the drug companies from sharing information about them with insurers, hospitals, and private practice doctors. This ban is meant to protect the approval process from the massive consumer demand that could arise from early marketing. But insurers and hospitals are less likely to apply that kind of pressure than potential customers.
The ban forces drug companies to spend a lot of money to get maximum publicity in a short amount of time once their expensive-to-produce drugs finally do get approved. Removing it will help spread the costs of informing medical professionals and consumers over a longer period.
3) Make more drugs over the counter
Even when the actual price of a prescription drug is relatively low, the real cost to consumers can be much higher if they have to visit their doctor every time they need to get a prescription. if some of those drugs were available over-the-counter like they are in other countries that would make them effectively cheaper. Chief among them are birth control pills and most statins that are available without prescription just about everywhere else in the world without any significant reports of abuse.
But even life-saving drugs like the highly-priced EpiPen could be made over the counter too. Why should everyone in America who legitimately needs these drugs be forced to pay so much more for them? We're not talking about addictive drugs like opioids here, but anti-allergy and asthma medications. Of course some knuckleheads might use them improperly, but we should give personal responsibility more of a role here.
The best part about over-the-counter drugs is that they're the one part of our health care system that doesn't include a third-party middleman in the payment process. And whenever someone gets in between the actual buyer and seller in a transaction, prices go haywire.
Remember, this is the same FDA that wowed medical innovators earlier this week with its announcement of a new digital health innovation plan that will lay out how new devices will be regulated so that developers don't have to waste time seeking guidance on a case-by-case basis.
Now it's time for the Trump team and the FDA to do something that will wow consumers without jeopardizing the pipeline for new drugs and treatments. Congress isn't in the way. President Trump should do this right away.
Commentary by Jake Novak, CNBC.com senior columnist. Follow him on Twitter @jakejakeny.
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