What’s the Right Conclusion?

I’m grateful that MSN repeated this Bloomberg Business article so I could read it. In it the author, Swiss journalist Fabienne Kinzelmann, decries the policy changes put in place by the Trump Administration:

(Bloomberg Businessweek) — For the past few years, Swiss oncologist Christoph Renner has treated blood cancer patients with Lunsumio, a new drug that helps the immune system recognize and destroy malignant cells. Then, last summer, Renner got an email from Roche Holding AG, Lunsumio’s manufacturer, informing him the treatment would no longer be available in Switzerland because health insurers there wouldn’t pay for the infusions. “You see what’s possible,” says Renner, a professor at the University of Basel, “and then you’re told you can’t use it.”

The move was a response to rules President Donald Trump introduced that force drugmakers to reduce their prices in the US to the lowest level paid in other developed countries. In Switzerland, new medications typically cost far less than in the US, so in theory Americans should benefit from the change. The problem is, instead of bringing prices down in the US, pharmaceutical companies are raising them elsewhere.

Yet Switzerland has shown little political willingness to pay more—threatening both the availability of medications in the country and its role as a global leader in developing therapies. Drug prices are the primary driver of the increasing cost of mandatory health coverage, and the topic generates heated debate during the annual reappraisal of insurance rates. “The Swiss cannot and must not pay for price reductions in the USA with their health insurance premiums,” says Elisabeth Baume-Schneider, Switzerland’s home affairs minister.

The global pharma industry sees an existential threat in amped-up efforts to rein in drug costs. That’s particularly true in Switzerland, where operating costs are already among the highest in the world. As pressure to cut prices spreads from the US around the globe, pharma companies say they may be forced to scale back operations in the Alpine country. Trump’s pricing scheme is “a direct attack on Switzerland as a pharma hub,” says René Buholzer, chief executive officer of Interpharma, a Swiss industry group. “Doing nothing and carrying on isn’t an option anymore.”

I’m not entirely sure what conclusion we are to draw from this. Should the U. S. continue to subsidize overseas pharmaceutical manufacturing? That’s the most obvious inference. I can see how the Swiss may have become accustomed to our paying higher prices than they do but I’m not sure why we should continue to do so.

Is it that overseas drug manufactures should make more prudent choices? Why are the costs of Swiss pharmaceutical companies high? The article is mute on that subject. I don’t know much about Swiss pharmaceutical companies but, unless they’re a lot different from U. S. companies, I don’t take her gesturing towards high research costs seriously. In one of my earliest posts here I demonstrated, conclusively I think, that U. S. pharmaceutical companies treated research as overhead (like telephone expenses) rather than production costs.

Using a comparative advantage approach, wouldn’t that suggest that Swiss companies shouldn’t be in the pharmaceutical business at all?

I know what my hypothesis would be: U. S. healthcare policy skews the cost of healthcare everywhere. But exploring that is beyond the scope of this post.