Pharmaceutical stocks were down this morning after President-elect Trump gave an interview to Time magazine in which he said, "I'm going to bring down drug prices. I don't like what's happened with drug prices."
As someone who believes prices should be set by voluntary, mutually beneficial agreements of willing buyers and willing sellers, without government political intervention, I cringed at that news. Then I remembered that the day before Mr. Trump had carped at Boeing's $4 billion price tag to replace two Air Force One jets and it struck me that, rather than singling out unfavored industries or companies for special negative treatment, Mr. Trump may actually be taking a consistent approach. Remember, the government is a huge direct and indirect purchaser of prescription medicines (as it is with military aircraft). As taxpayers, we should want the government to strike the best deal possible. And to the extent that lower drug prices mean less incentive for disease-curing innovation, there are a variety of ways to solve that problem that are more narrowly tailored than having the government overpay for drugs. Among the possibilities: the government could fund prizes for scientists, teams, or companies that invent life-saving drugs or cure diseases. The government could restructure health care so that more drugs are paid for by private payers and less by government payers (either directly or indirectly). The government can (as it is already doing to some extent) reform the FDA approval process so that drug efficacy approvals are less of a binary red light/green light from the government and more of an ongoing data analysis-based process from prescribers.
With Mr. Trump you have to remember he is a businessman and negotiator whose negotiating technique involves opening with a lot of bluster — like a pre-invasion bombing campaign — and then eventually trying to find a win-win deal. My hope, by the way, is that he's doing the same thing on immigration. But we shall see — it's certainly possible I'm guilty of wishful thinking here, and that drug pricing is just another issue where Mr. Trump is going to be like Senator Schumer and let grandstanding outweigh concern for free markets and rule of law.