Both before and after he became president, Donald Trump has talked about reducing drug prices, though he has rarely offered much in the way of details about how he'd do it. This week he singled out Pfizer, the massive pharmaceutical conglomerate, for a little Twitter abuse:
Pfizer & others should be ashamed that they have raised drug prices for no reason. They are merely taking advantage of the poor & others unable to defend themselves, while at the same time giving bargain basement prices to other countries in Europe & elsewhere. We will respond!
— Donald J. Trump (@realDonaldTrump) July 9, 2018
Soon after the tweet, Pfizer's stock price took a minor hit. After a brief phone call with the president yesterday, the CEO bowed to political pressure and rolled back many of the company's price increases.
It might be tempting to praise Trump for that, but presidential bullying really isn't the best solution to the problem of costly medications.
One big reason for those prices is patents, says Gilbert Berdine, associate professor of internal medicine at the Texas Tech University Health Sciences Center and a faculty affiliate with Texas Tech's Free Market Institute.
"The patent monopoly interferes with the market mechanism against raising prices however high you want," Berdine says. Freed from competition, drug companies can at least partially monopolize domestic markets and charge disproportionately high prices.
Supporters of patents argue that they give companies an incentive to produce new drugs and treatments. It's true that loosening drug patent laws might reduce the flow of new drugs to the market, but that's not a one-way street. Current patent laws keep drug prices high and take away resources from other productive sectors of the economy.
Public funding of precription drugs is another reason for rising drug prices. Medicare and Medicaid boost demand for these medicines and pay for them out of the government's deep coffers. "Taxpayers who are going to pay taxes," Berdine says, "and then Medicare or Medicaid will disperse their tax money to Pfizer."
And then there's an idea from a suprising source, Sen. Bernie Sanders (I-Vt.). Not ordinarily an advocate for laissez faire, the Vermont socialist has called for freer trade in prescription drugs. In response to Trump's tweet attacking Pfizer, Sanders wrote:
If you are serious about this issue, tell your Republican pals in Congress to pass bills requiring Medicare to negotiate drug prices and enabling the importation of safe, low-cost drugs from Canada and other countries. (2/2)
— Bernie Sanders (@SenSanders) July 9, 2018
Requiring Medicare to negotiate drug prices is more debatable, but opening the American medication market to foreign competition could bring down prices 35 to 55 percent, according to some estimates. Trump was right about that part: Other countries are getting "bargain basement prices," at least in comparison to America. Bringing in drugs from those countries would give pharma companies a reason to reduce their prices—or at the very least to stop subsidizing medicines abroad with American consumers' dollars.
Downsizing patent protections and reforming entitlement programs would do much more to achieve a long-term, sustainable decreases in medical costs than clumsy programs and presidential tweets ever could.