President Trump just issued several executive orders designed to reduce drug prices. The most consequential, dubbed a "Most Favored Nation" policy, pegs Medicare payments for medicines to the prices paid by foreign governments.
This plan would reduce access to today's innovative medicines and stifle medical progress. It must be shelved. There are much better ideas for reducing prescription drug costs.
Many foreign nations have single-payer health systems that impose strict price controls on new medicines and refuse to cover particularly expensive drugs.
Patients living in those nations end up with fewer treatment options. Patients in the United Kingdom and France had access to just seven in 10 new cancer therapies between 2011 and 2018. American patients could access to virtually all of them.
The U.S. market operates differently. Insurers compete for patients -- often by offering generous drug coverage. Drug researchers are incentivized to develop new treatments, as they know that American patients value innovation. As a result, research companies across the world generally launch their newest drugs here first.
The proposed executive order would slow medical progress. There are currently 4,500 drugs in America's development pipeline. These medicines target everything from cancer and HIV to heart disease and asthma. Price controls would inevitably reduce drug firms' revenues -- and leave them less to invest in research and development. This could block the next generation of drugs from ever even hitting the pharmacy shelf.