Rx For Lower Drug Prices

TL;DR: RX For Lower Drug Costs, Donation Protestations, And Facts And Credibility

Here’s what you need to know…

President Trump’s rhetoric toward drug companies, which he has accused of “getting away with murder,” has been heated at times. That is why the industry and others in the health care space were watching closely when the Administration’s plan to lower prescription drug prices was unveiled last Friday. The plan, entitled “American Patients First,” would be a step to fulfilling the President’s campaign promise to reduce the costs that U.S. patients pay for their medications, which are the highest in the world. Here is what you need to know about the plan:

  1. What The Plan Does: Despite the President’s past rhetoric and initial industry fears of “biting” action, the plan included few specifics that would immediately impact prices and no large reforms to the way the system currently operates. The plan seeks to “increase competition, improve negotiation and create incentives to lower list prices of prescription drugs and out-of-pocket costs for consumers,” and some of the ways it proposes to do that is by implementing rebate-sharing in Medicare drug plans (an idea supported by the Obama Administration), promoting generic versions of drugs, including drug pricing in trade negotiations with foreign countries, and requiring manufacturers to publish prices in advertisements. After Trump’s plan was criticized for being light on substance, Health and Human Services Secretary (HHS) Alex Azar briefed reporters on concrete actions he can take as HHS Secretary “with [his] pen” to make changes to the pharmaceutical marketplace without Congressional approval, suggesting the Administration’s seriousness about ultimately backing up its rhetoric.
  2. The Industry’s Reaction To The Plan: The gravest concern for the industry was that the proposal would allow the federal government to negotiate lower Medicare drug prices directly with insurance companies. When this did not come to pass, biotech and pharmaceutical stocks went soaring, as well as those of the pharmacy benefit managers like Express Scripts and CVS – “middlemen” previously condemned by the President. While drug companies that engaged in lobbying the executive branch in hopes of helping shape the plan may be relieved in having been spared from drastic changes to the operating landscape at this time, there is a possibility that the President may diverge from his current course, meaning that companies should continue to remain vigilant in monitoring developments in this policy area.
  3. What Remains Unclear Going Forward: The timeline for the implementation of the plan’s policy changes remains uncertain, as is the extent to which the HHS Secretary will use his pen to implement proposed changes in the marketplace. Because of this, parts of the industry are already signaling a more public lobbying campaign in the coming months while the plan is being debated. Particularly in the runup to the midterm elections, the industry may be a prime target for further public shaming, as well as more robust regulatory attention from both the Administration and Congress, that may impact research and development efforts and raise the specter of greater political risk.

As Trump’s FDA Commissioner Scott Gottlieb has noted, there is no “silver bullet” to bring down the costs of drug prices, especially when many Americans have unrealistic expectations regarding the trade-offs that would be required to implement policies to lower them. As long as these expectations persist, actual policy proposals will pale in comparison to the rhetoric used in the public arena and contribute to an operating landscape fraught with political and reputational peril for the industry.

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The Bay Area has become one of the wealthiest regions in the country and many tech moguls have already pledged to give away much of their fortunes, yet how some have chosen to donate their wealth has attracted scrutiny due to the potential benefits they receive in doing so. The Atlantic investigated the increasing popularity of a donor-advised fund, which is a certain type of charitable account that allows “donors to receive big tax breaks for giving money or stock” with “little transparency and no requirement that money put into [the account] is actually spent.” The rise in use of these funds has also correlated to a drop in donations to more traditional charities and private foundations in the Bay Area.

However, supporters of donor-advised funds point to the benefits of the accounts, which are better-equipped to accept non-liquid assets like stock, reduce the costs of operation needed by traditional nonprofit organizations, allow wealth to accumulate and grow like a charitable savings account, and incentivize people to get more bang for their philanthropic buck as opposed to giving more money in taxes to the federal government. So, while donor-advised funds may become another front in the public affairs campaign against Silicon Valley or the wealthy, as with all narratives in the public arena, there is more than one side to this story.


If you thought you knew the cause of the decimation of manufacturing jobs in the United States, think again. In fact, you would not be alone. Although economists’ popular consensus is that Chinese trade is the leading cause, a key expert disputes this consensus, pointing to research he recently posted that links job loss in manufacturing to the displacement of jobs resulting from automation.

China is blamed for the decline of the manufacturing sector largely based on a body of work that shows China’s 2001 entry into the World Trade Organization coincided with stalled growth in the American manufacturing economy, but Carl Frey – the Oxford economist whose study found that automation still has “a significant impact” while controlling for Chinese trade – disagrees, based off of his findings from examining automation anxiety and the 2016 election. For those trying to highlight the benefits of free trade in an operating landscape where consensus is constantly evolving, and where we all at times have only partial information, a competitive advantage that makes sense of the mass of information flows available is more important than ever in achieving their policy objectives.


Much of the focus on curbing the rise of fake news has been on top-down government regulation of tech companies and their platforms, but to curb fake news in favor of a more elevated, fact-based debate may instead require a grassroots approach. Felicia Cravens is a conservative activist who started the Unfakery Facebook page, which hunts for fake news, fake profiles, baiting spammers from overseas, and other forms of misinformation targeting conservatives online.

Since founding the group, Cravens has attracted like-minded conservatives from across the country who have credibility with their side of the political spectrum – which Snopes, PolitiFact, or Media Matters for America may not – to take a discerning view of the facts and context of articles and news shared online, lead where they may, and push back on misinformation by sharing credibly-sourced links. Besides demonstrating a way to curb fake news online without federal regulation, which ultimately stifles competition and benefits entrenched incumbents, another aspect highlighted by Unfakery’s work is that credibility is an integral aspect of leveraging facts to gain a competitive advantage. 


The Executive Office of the President’s (EOP) Spring 2018 Unified Agenda of Regulatory and Deregulatory Actions was recently released, and to help you better prepare for what comes next, here is where you can review by agency the proposed deregulatory measures on deck. The “steady, bit-by-bit” deregulation by the Administration has continued persistently despite all of the noise, confusion, scandals, and unforced errors that undermine The White House’s work on a near-daily basis, and will likely have a profound impact on the regulatory landscape beyond the life of this Administration. While the President was ridiculed when he wanted last year’s tax reform law to be called the “Cut Cut Cut Act,” given the Administration’s continuing work to cut regulations, might we propose a simpler name: the “Cut Cut Cut” List.