President Donald Trump is trying to best Sens. Bernie Sanders (I-VT) and Elizabeth Warren (D-MA) in demonizing pharmaceutical companies and using government power to lower drug prices. He announced last week that he will use the buying power of Medicaid to push prices down “to match the lowest prices paid by other developed nations.” The possible savings have not mollified critics of the plan, who say it would preclude larger savings in the works elsewhere.
But there is no getting around the fact that any time the government puts its thumb on the drug price scale, it risks reducing pharmaceutical firm revenues and forestalling the development of new life-saving or pain-reducing drugs. As a National Bureau of Economic Research study found, “cutting [drug] prices by 40 to 50 percent in the United States will lead to between 30 and 60 percent fewer R and D projects being undertaken in the early stage of developing a new drug.”
