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Trump Blasts Pfizer for High Drug Prices

The president attacks Pfizer for a recent round of price increases but ignores the real reasons for the high prices.

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:

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.

IGOR STEVANOVIC / SCIENCE PHOTO LIBRARY/NewscomIGOR STEVANOVIC / SCIENCE PHOTO LIBRARY/NewscomOne 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:

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.

Photo Credit: IGOR STEVANOVIC / SCIENCE PHOTO LIBRARY/Newscom

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  • BestUsedCarSales||

    Let me buy more drugs without prescription too. I want way too much boner pills and I want it NOW.

  • Citizen X||

    Dispatcher: "911, what's your emergency?"
    BUCS: "I took half a bottle of Cialis and my dick's been rock hard for six hours!"
    Dispatcher: "Do you need me to send and ambulance-"
    BUCS: "Actually i was wondering if you wanted to come over."

  • BestUsedCarSales||

    Were you the dispatcher last night, or were you wiretapping me? Choose your answer carefully, I have many lawyers at the ready, all from Norfolk.

  • Citizen X||

    Just an educated guess.

  • Diane Reynolds (Paul.)||

    Gender of dispatcher?

  • Don't look at me.||

    Not important. It's how the dispatcher identifies xerself.

  • Leo Kovalensky II||

    Irrelevant at 6 hours. Any port in the storm, as the saying goes.

  • Echo Chamber||

    "Current patent laws keep drug prices high and take away resources from other productive sectors of the economy."
    Yeah, high drug prices are totally due to patent protection.
    High drug prices have nothing at all due to the cost of bringing the drug to market.
    Let's get rid of patent protection, and let knock-offs from India and Israel drive down prices.
    Pretty much any disease worth curing with pharmaceuticals has already been cured anyway.

  • BestUsedCarSales||

    I'd be curious how much affect would happen just be loosening FDA bullshit. The Epi-pen issue a few years ago really highlighted a lot of the bullshit there, in how even with drugs that can legally be reproduced here, the FDA prevents new versions of the drug from coming to market.

    So, I wonder how much could be done there.

  • Echo Chamber||

    Cutting the regulatory burden would have an impact on lowering development costs.
    The problem is that demand for medicine is highly inelastic, so the market will bear whatever price Phama puts on the pill. Top Men cap the prices electric utility companies can charge. What could go wrong with having them set reasonable levels of profit for drug companies too?

  • BestUsedCarSales||

    But with the epi-pen issue we had a situation where generics were legally allowed to be made, but that the FDA had effectively prevented any competitors from entering the market. And certainly in that case competition between multiple pharmaceutical companies could lead to prices dropping.

    This is the FDA acting as an extra block to competitors entering beyond even the patent law question.

  • Echo Chamber||

    excellent point

  • Bubba Jones||

    Not quite. One competitor had quality issues, another was withdrawn because it was awkward to use and no one bought it.

    This wasn't really the FDA's fault. This was an example of epi pens being harder to make than people realize.

  • Rossami||

    That's a very rosy-colored description of the Epi-pen situation, Bubba. The alleged quality issues were no worse than the quality issues faced by any other manufacturer including the maker of the Epi-pen. Despite being no worse than the market leader, the FDA put multiple stumbling blocks in the way of the competitor's product. They slow-walked approvals and strung out decisions. They repeatedly demanded extra data that had no bearing on the actual safety of the product.

    It is notable that overseas competitors to the Epi-pen have been available for rather a long time and have an excellent safety record. It is implausible that auto-injectors are magically harder to produce only in the US.

  • Happy Chandler||

    The Epipen issue actually seems to be more of an issue of illegal price fixing.

    They also had to pay nearly half a billion dollar fine for ripping off state health plans.

  • Echo Chamber||

  • sarcasmic||

    A patent is a government-granted monopoly. Of course companies are going to use it to charge as much as they possibly can. That's what happens absent competition. It's about as basic as economics gets.

  • Leo Kovalensky II||

    The claim is that absent patents there would be no motivation for the R&D required for some of these drugs. Qualitatively, you don't see nearly as much R&D and innovation in places like China where patents are virtually meaningless, so there is some indication that it's correct.

    Regardless, I'd rather have a scenario where there are patents and private companies are allowed to innovate and recoup some of their costs vs the alternative of governments taking tax dollars and funding research. Too many opportunities for waste and abuse with the latter. With the former, there is still a profit motive driving efficiency in the R&D.

  • loveconstitution1789||

    Its a necessary problem to being completely free market.

    Companies are not going to risk years of R&D to have a startup steal their formula and sell the drug cheap.

    The patent terms are probably too long.. 20 years is the current period. It can take 8 years on average to develop new drugs and get them to market. Cutting red tape could get drugs to market faster and allow the companies to recoup costs faster.

  • Leo Kovalensky II||

    You're correct. ONLY shortening patent periods just means that they need higher margins before their patent expires to recoup their costs. You have to shorten the R&D cycle either through cutting red tape or other means of efficiency in R&D.

  • loveconstitution1789||

    Certainly Leo. I dont see how you can cut patent periods and not cut government BS to get the drugs to market. It goes without saying that drug companies would still be liable for product liability due to dangerous drugs rushed to market.

    Risks are inherent in medicine not being 100% effective nor being 100% safe for everyone.

    You dont want cars exploding spontaneously because they are not designed for that. Drugs should not kill more than they help as they are not designed for that.

  • Echo Chamber||

    "Tufts Center for the Study of Drug Development (CSDD) pegs the cost of developing a prescription drug that gains market approval at $2.6 billion. The figure is based on an average out-of-pocket cost of $1.4 billion and an estimate of $1.2 billion in returns that investors forego on that money during the 10-plus years a drug candidate spends in development."
    A lump-sum investment of $1.4 billion would get to $2.6 billion 10 years later at 7% per year

  • ||

    Does that figure account for failures?

  • BYODB||

    I don't think it does since failures are much harder to measure and would give a shitty average since one drug might clearly fail after five minutes of testing whereas another could fail after five years of development, but I could be way off base.

  • Bubba Jones||

    I can tell you of a local pharma that has spent $2B over 20 years and has one drug on the market that is barely earning a couple million a year...

  • JunkScienceIsJunk||

    Companies are not going to risk years of R&D to have a startup steal their formula and sell the drug cheap.

    ...except they totally do.

    Ever wonder why Bayer makes so much money on frickin' aspirin, even though there's no patent protection? Or why McNeil (Tylenol) makes so much money on acetaminophen, even though you can buy a generic version on Amazon for 1/5 the price? One word: marketing.

    My mom SWEARS that the Equate brand acetaminophen I buy her doesn't work but that the Tylenol version does. She's not in the minority.

  • Happy Chandler||

    Cutting the red tape is all well and good, but it backfires when people start dying. There's a reason that the system has developed.

    A couple of issues go beyond the patent period. First is brand names paying the generics not to bring their version to market, allowing a monopoly to go past the patent period. This should be illegal market manipulation. This is particularly profitable during the 180 day exclusivity period for first to file generics. I just googled -- the Trump budget would change some of the mechanisms to reduce gameplaying the exclusivity period.

    Second is making minor changes and filing for a new patent. This seems to be playing on the way doctors, pharmacies, and insurance companies work together. For instance, moving from an 8 hour pill (3x/day) to a 12 hr (2x/day) restarts the patent. Doctors prescribe the new formulation and there's no generic. You can't substitute the old generic for the new brand. Boom, profit.

  • DrZ||

    "Cutting the red tape is all well and good, but it backfires when people start dying. "

    You may be correct about this, but does it have to be government oversight in the form of the FDA? Might it be possible to have a medical/drug equivalent of Underwriters Lab, aka UL? Or is there some reason that only the federal government is capable of approving drugs?

    Many claim that the heavy regulation of airlines by the FAA prevents accidents. When I hear this I wonder that if the FAA were to cease to exist would airlines start having "fun" and crash some of their airliners? I doubt it. All airline companies know that a good safety record is important to their health regardless of which company has an accident. If the FAA were to cease to exist tomorrow, I would put money on an industry-wide safety inititate to level the playing field in preventing accidents. All airlines want their company to have a 100% perfect safety record and will not likely ever compete on differences in accident rates. Safety, then will evolve into an industry-wide cooperative effort if there were no FAA.

    I suspect drugs will be similar.

  • Lowdog||

    Read "Death by Regulation" by Dr Mary Ruwart to dispute your assumptions. Basically, the amendments passed in 1962 have shaved years off of everyone's life thanks to your red tape.

  • Rossami||

    re: "Cutting the red tape .... There's a reason that the system has developed."

    Yes, there is - and it's usually not a good one. Like most regulations, the current system was built based on a very few photogenic problems. The current system is ineffective at actually preventing any of the outlier situations that led to the problems that started the whole mess.

    The current system is, however, very efficient at blocking new market entrants who might challenge the incumbents. And it feels good for politicians to say that they "did something". Those don't seem to me to be sufficient justifications for the evils of the current system.

  • ||

    Interns. Sigh. AARP horseshit statistics that completely ignore price controls and the ultimate impact on drug development? Really? Egads...

    Look, Bernie is a fucking buffoon. And so is The Donald. Neither is honest about both patents and foreign price controls.

    Maybe the trade war will fix it. ;)

  • sarcasmic||

    Damn straight! Those foreign governments are taxing their people to subsidize drug companies! Their prices are artificially cheap, and that's not fair! We need to make those foreign drugs so expensive that no American can afford them! Then we'll be rich!

  • loveconstitution1789||

    Basic economics means that if foreign nations pay less then someone has to pay more. The drug companies have to recoup "x" amount for that drug to be profitable. Additionally, current drug costs are factored into costs that include R&D for future drugs.

    Even with all the regulations and bullshit restrictions, US drug manufacturers produce some of the best drugs in the World. Imagine if patents were 10 year periods and time to market was cut by 50%?

    German drug companies used to be powerhouses of great drugs. Those companies were eviscerated by socialist policies and government regulation.

    Methamphetamine used to be available to anyone who wanted it.

  • Happy Chandler||

    Basic economics is willingness to pay and marginal cost of production. There is no economic theory that states that prices will be raised in one market to make up for the other. If raising prices in market A would bring in more profit, it would have been done already.

    Germany lost their dominance in pharmaceuticals when the entire country was leveled in WWII. Still, Bayer is pretty big (although . So is Merck and Boehringer.

  • ||

    Every other country in the world free-rides on US drug innovation by putting the majority burden of drug research costs on US healthcare consumers. And they do this via price controls. You want the same amount of research we have now and have lower prices in the US? Good luck with that without getting everyone else to pony up.

  • loveconstitution1789||

    "And they do this via price controls."
    Trade restrictions that Trump is trying to get lowered.

    I say fuck Europe and Canada. If they wont pay for the 'costs' of the drugs, then they get nothing. Its up to the companies though. They still make good money even with price controls. If you cant get high prices you can make up for it with quantity in sales.

  • Happy Chandler||

    Pharmaceutical price controls are not a trade restriction. They apply equally to domestic and imported product.

    Trump is not trying to reduce trade controls. He is enacting them, and the other countries don't even have a way to appease him, because what he is asking for is illogical and in many ways can't be accomplished. Also, he is working at cross purposes with himself - witness him boasting about saving jobs at ZTE, a company that violated Iran sanctions and uses their products to spy on foreigners.

    The tax cut was a direct increase of the trade deficit: The US government borrowed money, which goes to corporations, which are buying back shares. 1/3 of the shares are owned by foreigners. Boom, trade deficit.

    The trade deficit has little to do with trade and more to do with how much we borrow versus what we produce.

  • loveconstitution1789||

    Trump said that the USA would end all trade restrictions if the G7 trading partners ended their trade restrictions. They declined.

  • JunkScienceIsJunk||

    The other countries are assholes for not accepting his offer. The US is an asshole for engaging in the very same behavior that it is criticizing. You may be right that his move is strictly temporary and strategic, but if that's truly his motivation, then it's unrealistic and frankly it's playing with fire (because it's a revenue generator, and the federal government never met a tax it didn't like).

  • BowserB1946||

    MP, that is precisely the problem. Other countries won't pay the high prices, so the drug companies sell there for less, because it's incremental revenue, and the R&D is covered by Americans through high prices. The spot the drug companies are in is that if they don't sell for less overseas, then manufacturers in other countries will illegally copy the drugs, while their government looks the other way. Pretty much like all intellectual property--books, music, movies, software, etc. The governments of other countries aren't going to spend money to defend American patents and copyrights. And that is a big problem, since most new stuff is invented here.

  • Sevo||

    Trump was doing some fine stuff for the first year or so, and now he's turning into what my best hope was when he got elected:
    He saved us from the hag's SCOTUS appointments.

  • sarcasmic||

    but opening the American medication market to foreign competition could bring down prices 35 to 55 percent

    That makes us poorer! Just like cheap stuff from China and Mexico makes us poorer! The more we pay for stuff, the richer we are! Slap 1000% tariffs on imported prescriptions and we'd all be millionaires!

  • Fist of Etiquette||

    OUR PRESIDENT NEGOTIATED BETTER DRUG PRICES FOR PEOPLE AND YOU WANT TO SCOLD HIM?

  • Don't look at me.||

    Because he is a white man = evil.

  • Leo Kovalensky II||

    It's amazing what companies will do when the full force of the US government is behind the tweet.

  • BYODB||

    But can foreign drug makers clear the FDA hurdles to sell in the U.S.? Blaming patents is the tip of that iceberg.

  • Happy Chandler||

    These are the same drugs that are already approved and sold in the US.

    The Libertarian model is that prices shouldn't be controlled. We should allow purchasing goods that other countries control the prices of. For example, a pill manufactured in the US for the Canadian market (identical to one for the US market) costs $1 vs $10 in the US. So, buy the Canadian pill.

    America first, by letting other countries control the prices we pay. Efficiency, by shipping drugs to another country and then shipping them here.

  • loveconstitution1789||

    Longer patent periods, government regulation for drug research, regulation relating to doctor visits and prescriptions, and Medicare/Medicaid artificially lowering drugs costs probably contribute more to the costs than patents themselves.

    Drug companies peddling drugs to doctors and advertising seem to be huge costs too.

  • Diane Reynolds (Paul.)||

    You know who else blasts Pfizer for high drug prices?

  • Shirley Knott||

    Perhaps worth pointing ou. Once you're on (or perhaps merely eligible for) Medicare, no company is allowed to cut you a better deal than Medicare gets. No membership-based discount drug plans, nothing.
    Their way or no way.

  • DrZ||

    It's beyond medicare, it's the whole system. Several years ago I decided to self-insure. I thought I had purchasing power, but little did I know.

    I approached my optomologist and my dentists and told them that I would put cash on the table, payment in full for each visit. What kind of a discount would they be willing to give me? I thought it would be substantial because they had cash, no insurance or medicare hassles, just cash in pocket after a visit. I was wrong. They both told me that they could not lower their rates because they would have to justify this to the feds and to insurance companies both of which effectively told these provider you can charge no less than what we are demanding you charge.

    So much for the free market.

  • loveconstitution1789||

    I get cash discounts all the time.

    You need to shop around which is also a part of free market.

  • DrZ||

    You are likely correct for today's market. My "shopping" was over 10 years ago. So the system was really anti-market in those days. I do get a slight cash discount from my dentist, about 5%, but I am sure that my cash probably saves him a lot more not having to hassle with insurance.

    I am a proponent of cash-only sugical centers, Direct Primary Care and HSAs. Both are proving that insurance company and government insurance creates a lot of overhead.

    Since I am now on medicare, I have no incentive to shop. I just get medicare statements I never understand and have to pay the minimal (so far) 20% part.

    I hope this country wakes up to free market medicine and soon.

  • Diane Reynolds (Paul.)||

    Is Sanders no longer in the Senate? He keeps asking the wrong person to do something that he has the power to do. What am I missing here?

  • ||

    Sanders is a card carrying member of the Imperial Presidency Booster Club.

  • Don't look at me.||

    He is impotent.

  • Leo Kovalensky II||

    Sounds like he needs Pfizer more than Pfizer needs him.

  • Bubba Jones||

    LOL.

    Drugs shipped from India via Canada to the US are not regulated by Canada. So.... what do you think would be the counterfeit rate for those drugs imported through Canada?

    Legit drugs shipped to price control countries will have strict provisions against re-export.

  • Drig||

    Why no mention of the enormous costs associated with jumping through FDA hoops during the process of bringing a pharmaceutical to market?

  • Jerryskids||

    If I didn't know better, I'd say Trump's tweet almost makes it sound like he doesn't understand marginal costs and marginal-cost pricing. But I'm sure he's comfortable with government deciding what the "right" price of something should be rather than letting "whatever the market will bear" be the standard - he's a real estate developer in NYC and I'm sure he's happy with the rent-control scheme they use there. But just out of curiosity, what percentage of Trump's properties in NYC do you suppose are rent-controlled?

  • JunkScienceIsJunk||

    The overlooked part of all this is that the majority of the "R" in "R&D" is taxpayer funded. Nearly every significant drug innovation in the past 20-30 years had its beginnings in a research lab either funded directly by a government organization or aided by an industry-academic partnership (which is basically taxpayer funded). Furthermore, the entire basic science apparatus that contributes to the process by expanding the body of biomedical knowledge is largely funded by a government (not just the US).

    When private industry takes the baton and then uses government privilege to charge whatever it wants, there's a problem. This is why fascist (i.e. public-private hybrid) economic models suck. Bernie's so-called "freer" market doesn't resolve this problem. Neither does the conservatives' view of scraping away some taxpayer funding but retaining government control over production. Price controls may be the LEAST bad of the bad ideas.

  • Michael S. Langston||

    The overlooked part of all this is that the majority of the "R" in "R&D" is taxpayer funded.

    Sorry, but that's untrue. While it is true a lot of early research is taxpayer funded via Universities, they don't actually go from concept to drug to double-blind trial drugs under FDA supervision and control.

    IE - that early research must happen to get current drugs to market, but academic medical research doesn't include mutil-year human trials, which is where the real costs and risks exist.

  • JunkScienceIsJunk||

    1) It often does include participation in conducting multi-year human trials. Very often, actually. But...
    2) ...that doesn't really matter, because I consider that part of "D" anyway. It's generally not part of the process of discovery or characterization. It's part of the engineering.

    Whether you count it as "R" or as "D" though really misses my point. The point is that it's a hybrid system and is effectively a subsidy.

  • JunkScienceIsJunk||

    Also -- again, as an attempt to avoid a semantics war over what "R" and what "D" mean -- my greater point was that in the current environment public money is an essential contributor to drug development. This recent study showed that there were 210 new drugs classified by the FDA between 2010-2016, and every single one of them got their start from taxpayer funding.

    I'm not advocating public funding. I think it can be accomplished entirely in the private sector, probably more efficiently too. But just like farming subsidies -- if they're going to exist, then what the hell are we the taxpayer getting out of it?

  • Fats of Fury||

    Seems to me the drug companies are in cahoots with the FDA. The only prescription I have is for a generic drug that jumped 837% after the FDA declared it a new drug and Taro Pharmaceuticals did the compliance tests. Talk about $600 hammers. Everyone wins but the affected.

  • Rossami||

    The term for that is "regulatory capture". And, yes, it's both a serious problem and one of the best reasons for limiting what the government has the power to regulate.

    $600 hammers, on the other hand, was not regulatory capture. I lived through that fiasco. To this day, I am undecided whether that was plain old graft or a ham-handed way to disguise the funding for some covert program.

  • Fats of Fury||

    And some of the problem isn't new drugs but the FDA allowing companies to re-patent existing generic drugs.

  • Enemy of the State||

    test

  • I am the 0.000000013%||

    The belief that drug companies won't do research on new drugs unless there are guaranteed profits is ludicrous. It takes an insane amount of money and research to bring a new microchip to market, and yet lots of companies do it all the time with the effectiveness always increasing and the price often dropping. The only real market protections they have are patents.

    We can remove an incredible number of obstacles to drug and medical device creation.

    - Pass a law that fully supports certification of drugs and medical devices by private, for profit, certification agencies. They will live and die by their reputations, unlike the FDA which just whines they are underfunded so they have no choice but to be a slow gatekeeper.

    - Pass a law indemnifying reviewers and review sites for anything to do with health care. Tripadvisor has increased the predictability of motel sites by an unbelievable amount. I can decide up front what I want to pay for what I get, and I'm almost always pretty satisfied with my decision.

    - If there are any regulations prohibiting all the varieties of funding mechanisms (kickstarter, VCs, etc...), eliminate them.

  • JunkScienceIsJunk||

    Your suggestion #1 is still regulation and your suggestion #2 doesn't seem necessary from what I can tell.

  • I am the 0.000000013%||

    - Remove the whole prescription mechanism. I can buy drano or antifreeze just about anywhere, and it will kill me every bit as effectively as any prescription medicine. I give a shit about what I put in my body, and with review sites, certifications, and professional recommendations, I can be damned sure that what I decide to take for my health needs is going to be the best bang for my buck. Unlike currently where I have to hope that my doctor has a fricking clue in the 15 minutes I can afford and isn't in bed with some pharmaceutical company or just has no awareness of anything more modern than 10 years ago.

    - Allow people to buy medical services tax free, and let us fund HSA's at high levels. The more money that is out there that is going directly to health care providers and researchers, the faster health care will progress.

  • Rossami||

    Buying from Canada is the opposite of free trade. Sanders is an idiot without the slightest clue about how economics work.

  • Joe Emenaker||

    What I haven't seen suggested, anywhere, is something where, once there were more than one company with a viable drug for ailment X, the gov't could step forward and say "Alright, we're going to buy one of your patents and then we're going to put it in the public domain. How much does each of you want for your patent?". It would start a (low) bidding war since, whichever company doesn't get the gov't to buy its patent is going to be left with very little since a super-cheap generic competitor will be available. In one sense, it's no different from defense contractors bidding for a contract. Also, it's probably functionally equivalent to having the patent expire earlier (although easier to achieve, since one might be able to be done through the executive, while changing patent law would require congress).

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