Editorial: Americans thought they would get a Pharmac from Trump

US President Donald Trump speaks during an event about prescription drug prices in the Rose Garden of the White House. Photo / AP

Editorial

If New Zealand was showing any interest in a bilateral trade agreement with the United States, it would be time to worry about Donald Trump's latest utterance on pharmaceutical exports.

"When foreign governments extort unreasonably low prices from US drug makers," he said, "Americans have to pay more to subsidise the enormous cost of research and development." Fixing this "injustice" would be a "top priority with every trading partner".

But the only way that this could threaten Pharmac, New Zealand's public funder of prescription medicine, would be if Trump seriously wanted to negotiate a US return to the Trans-Pacific Partnership agreement. While he sometimes sounds open to rejoining the TPP it would be on his terms and he is probably not capable of making the concessions required for a multilateral trade deal.

His preference remains direct negotiations with individual countries from a position of overwhelming strength and he has many bigger fish to fry than New Zealand. If they are wise, none of the 11 members of the TPP will line up to be fried. So long as smaller countries stick together in trade negotiations, state purchasing agencies such as Pharmac should be safe.

No principle of free trade says governments are obliged to pay whatever price a supplier demands for a subsidised product. Pharmaceutical companies are free to sell their products here at any price they want. But since the price they want is so often beyond the means of those who need the products, they need governments or insurance providers to pay for them. It is perfectly in order for those purchasers to drive a hard bargain.

Government agencies manage to negotiate much better rates than US insurance companies, which even Trump recognised when he was running for President. He used to say pharmaceutical companies were "getting away with murder" in the US and he was going to use the buying power to the federal government's Medicare programme to negotiate lower prices for its aged beneficiaries.

That was what Americans were expecting to hear last Friday when the President stepped into the White House rose garden to announce the "most sweeping action in history to lower the price of prescription drugs for the American people".

But instead of an aggressive price negotiating system, which drug companies fiercely oppose, his plan consisted of efforts to improve competition among suppliers and transparency in pricing, besides trying to make other countries pay more for the medicines. He call his plan, "American Patients First".

American patients obviously bear more than their share of the cost of researching, developing and testing new medicines and the costs are astronomical. Many drugs undergo years of testing only to fail.

But those that prove successful are given patent protection for a period that was to be extended under the TPP. Trump was very foolish to withdraw from that deal, he is unlikely to get a better one.

Once again, he has betrayed the interests of most of those who voted for him. They need a Pharmac instead of health insurance plans that are steadily placing more of the cost of prescriptions on to those who can ill-afford them.