What Trump should do if he actually wants to cut drug prices

President Donald Trump nominated Alex Azar to serve the next secretary of health and human services last week, tweeting that he would be "a star for better healthcare and lower drug prices!"

In fact, Trump has made many grand claims that he will bring drug prices "way down." But if the president is serious about drug pricing, Azar’s record isn’t promising. During his tenure as head of the U.S. division of pharmaceutical giant Eli Lilly and Co., Azar tripled the price of that company’s insulin, and he has played down the problem of high drug prices, arguing that they do not drive health-care costs.

The selection of Azar is important because the president already has significant power to tackle drug prices without the help of Congress. But he needs help from the HHS secretary.

So what could an administration serious about lowering drug costs do? For one, it could allow importation of more affordable drugs from Canada. Congress authorized pharmacists and wholesalers to do this in 2003, subject to the approval of HHS. But as a drug company executive, Azar went on record rejecting this approach. He said - as the industry long has - that the quality of these drugs cannot be guaranteed. But history shows that safety concerns can be properly managed, since the Food and Drug Administration previously has imported drugs to respond to critical shortages, and more than 40 percent of finished U.S. drugs - brand name and generic - are already manufactured overseas. The FDA could help develop similar safeguards for this purpose while guiding foreign manufacturers through U.S. inspections and approval, ultimately expanding even beyond Canada.

Once sensibly implemented by the FDA, importation provides an important way to combat unjustified price hikes for older, off-patent drugs. Turing Pharmaceuticals, for example, made news a few years ago when it acquired the U.S. rights to Daraprim, a drug long used to treat an infection that can affect those living with HIV/AIDS, and raised the price from $13.50 to $750 per dose. But the drug was being sold for $1 to $2per tablet in other countries.

Second, Congress provided a pathway to ensure drugs developed directly from federal government funds are fairly priced in the Bayh-Dole Act of 1980. The federal government funds a great deal of research, and some of our most important new medicines come from that funding. One review found that public-sector research institutions directly contributed to the intellectual property covering more than 150 drugs and vaccines over the past four decades. If the Trump administration were serious about addressing the drug-pricing problem, HHS could require fair pricing of products developed with federal funds, and define circumstances when the government will intervene - such as if the drug is priced far beyond the average price in a set of comparable countries around the world. This would ensure that taxpayers get reasonable prices in exchange for their investment in a drug’s development.

Finally, Trump and Azar could bring the pharmaceutical industry to the negotiating table for excessively priced essential drugs covered by government payers such as Medicare and Medicaid. Current law allows federal programs to seek competitive bids for patented medicines, even if they come from companies other than the patent holder. In return, the government awards reasonable compensation to the brand-name manufacturer. If the government and company cannot agree on the compensation level, a court will set the amount - which may be quite lucrative but will likely be less than the price set by manufacturers in the inefficient U.S. market.

The government already used this law to obtain cheaper generic antibiotics for the military in the 1960s. In 2001, when anthrax attacks led the government to seek a stockpile of ciprofloxacin, George W. Bush’s administration threatened to use the provision, and reportedly achieved a 50 percent discount as a concession (Azar was serving as HHS’s general counsel at the time). HHS could explore the use of this option for federal programs and to work with states that want to invoke this strategy to expand drug coverage to local residents in need.