Sacrificing Pharmac: Why NZ Is The Perfect Pawn In USA’s Price Game

In May this year, An executive order from the United States was written up titled ‘Delivering Most‑Favored‑Nation Prescription Drug Pricing.’
The idea here was for American health agencies to set U.S. drug prices equal to the lowest price paid by comparable (i.e. ‘wealthy’) nations. It’s been tried before with a similar MFN scheme in 2020 though that was gunned down shortly afterward by the courts and rescinded a year later.

‘Big whoops!’ I hear you say? Well, be careful, because if this gets traction there could be far-reaching consequences in healthcare across the world. With New Zealand being a prime target to get dragged into the morass – and our pharmaceutical prices getting jacked up as a result.

Why? Because we’re small, economically non-threatening and our glittering example of a cost-effective drug buying agency Pharmac is exactly what Big Pharma want to tear down. Plus, by fighting a drug price war on foreign soil, the US can be seen to be doing something for their people – even if they have zero interest or incentive in changing their status quo at home. What do they care if they end up forcing prices to rise someplace else so long as they win re-election?

Mr. Distraction

Of course the strategy of distraction is almost certainly in play here – annexing Greenland was floated earlier this year, along with making Canada the 51st state and renaming the Gulf of Mexico the Gulf of America. Gosh, that’s right; whatever happened to those stories? Well, nothing really. They just faded into obscurity having served their purpose of controlling the headlines.
So could the Most‑Favored‑Nation Drug Pricing Initiative go the same way? Almost certainly but, like the above issues, there isn’t a 0% chance of this policy ever being enacted – particularly now it has been aired in public. A second time! Thus it would be foolish to say; ‘oh, it will never happen!’ Some form of an MFN policy certainly isn’t impossible and Brexit comes to mind as a similarly populist idea that ended up becoming law.

America – Home of the Overpriced Drugs

The main reason for this policy appearing at all is that it would be popular domestically. Who doesn’t want affordable pharmaceuticals?
Especially in America where they are eye-wateringly expensive. Check the following Humira pricing comparison across various countries. This isn’t an exact science seeing as healthcare systems, data availability and dosage delivery systems vary between countries, but they give you a rough idea of what’s going on out there:

Humira (adalimumab)
Global Price Comparison

U.S. $6,900
U.K. $860
N.Z. $800-$1200
Australia $1500 – $1800
Sweden $1570
Brazil $1000 – $1200
India $1400
China $1200 – $1400

One of these things is not like the others! Obviously prices for pharmaceuticals in the US are typically 5 times more expensive than they are elsewhere in the world. That’s a big, big discrepancy and, if you are having to go into massive debt to pay for a cure, you want to know why.

So Who Pays For Drugs In The U.S.?

Everybody but Big Pharma it seems! On paper it is the insurance companies who pay the bloated drug prices in the US but of course it’s a different story once you crunch the numbers. The insurance companies pass most costs on through higher premiums to policyholders and negotiate rebates with the pharma companies behind closed doors – which they largely keep for themselves.
In the US, companies that provide employee health insurance also absorb a big chunk of these costs and the taxpayer stumps up a swag through Medicare and Medicaid. The rest is paid for by individual patients via outrageously overpriced treatments like insulin, EpiPens or cancer treatments. What it all means is that Everyday Joe Americans look at the prices people pay for drugs overseas and go; ‘Hey! This sucks! Something’s wrong here!’

Get Them Dastardly Freeloaders!

So it’s easy to see why this MFN policy is getting pushed. An easy soundbite ‘other countries are free-loading off our innovation’. By legislating to tie US drug prices to the lowest paid by another nation gives a sense of equality.

Big Pharma is the biggest lobbyist in Washington spending US$372m in 2023 alone. That’s a lot of attention-grabbing campaign contribution cash for any politician and, with an army of ex-legislators working for Big Pharma who know exactly how to kill a bill, it’s easy to see how any attempts at reform get squashed in House and/or Senate committees.

The Perfect Sized Villain

The obvious solution for Big Pharma is not to lower the prices in the U.S. – why the hell would they do that?! They’re making far too much money there as, unlike overseas agencies like NZ’s Pharmac, the US equivalents don’t negotiate (even by law until recently!). A far easier option for them would be to jack up the prices everywhere else in the world to make them comparable to those in America. Of course, that might get messy with protests and bad PR in bigger countries like Canada, European nations and even Australia.

But a so-called wealthy nation like New Zealand? A different story. Small enough to not be worth keeping as a trade partner and just wealthy enough to not to look like an impoverished victim of American bullying, New Zealand is the perfect size to be painted as the villain in the story: “Americans have to pay $500 for a drug that Kiwis get for $25. Why? Because they’ve got dirty, filthy SOCIALIST government price controls, so we’re subsidising their freeloading.’

No mention of real market values, nor of any absence of tough negotiating in their own country – just pure blame game. New Zealand better start paying American-style prices or else; no more new drugs or even access to any life saving drugs at all.

What Can We Do About It?

If such a battle comes to pass then there isn’t a lot we can do as we can’t rely on our usual allies like the U.K. and Australia as they’ll just be happy it’s not them being picked on instead of us. The one thing we could do however is to keep highlighting the cost of the drugs in every single country outside of the US – and ask for a breakdown as to why the very same drugs strangely seem to cost 5 times as much in the US. All day, every day. That should do it.

How Likely Is This To Happen?

In all honesty, it isn’t likely. Big Pharma is pretty comfortable where they are. Why wouldn’t they be? They’re making enough money in America to not have to worry about the rest of the world so they aren’t interested in rocking the boat at all. True, politicians are interested in ‘appearing’ to be doing something to help the ordinary American – but they are completely disincentivised to actually carry any major policy changes through. Should they do so, they will be feeling the entire weight of the US legislative system blocking them – and quite likely will meet with some unfortunate ‘accident’ sooner or later if they persist too. There is that much money at stake.

A chess grandmaster plans for every move, even the improbable. In the game of global drug pricing, we’d be fools to assume America’s worst instincts won’t play their hand.