Americans pay 4x more for medicine—do we have to?

Why Most Favored Nation drug pricing will slash drug spending in America: Prescription drug costs in the U.S. average four times higher than those in comparably developed nations. Aiming to lower those costs, President Trump signed an executive order earlier this month reviving the “Most Favored Nation” (MFN) drug pricing policy, which would align prices in the U.S. with those in peer countries. Although critics argue that MFN amounts to price controls that risk innovation, in a new article for FREOPP, Resident Fellow Gregg Girvan and Visiting Fellow Grant Rigney explain that U.S. drug markets already lack free-market dynamics due to monopolies, regulatory barriers, and opaque middlemen. Plus, previous FREOPP research demonstrates that most innovation comes from small biotech firms, not profits from high prices at big companies. MFN has the potential to help fix a broken system, increasing access to essential treatments without sacrificing innovation—something both parties should be able to support. Trump should assemble a bipartisan coalition and pass MFN into law.

→ In other health care news, check out FREOPP Co-Founder and Chairman Avik Roy’s simple idea to provide better health care coverage at a lower price by replacing Medicaid expansion with exchange-based coverage. Meanwhile, scholars debate how the “big beautiful bill” will affect the Affordable Care Act. Read more—including Gregg’s take on what the changes mean for Americans in the gig economy—at Yahoo! Finance.

Did the TCJA increase wages? It’s complicated: As Congress works toward renewing 2017’s Tax Cuts and Jobs Act (TCJA), FREOPP Visiting Fellow Jackson Mejia dug into the data to assess its impact on wages. He notes that the bill’s corporate tax cuts clearly spurred investment. However, after reviewing the most recent evidence on the wage effects of TCJA, Jackson argues that wage gains have been modest and skewed toward higher earners so far. As it may take decades for the long-term wage effects to materialize for low-income workers, Jackson urges policymakers to pair tax cuts with reforms—like deregulation, labor market competition, and employee ownership incentives—to accelerate and broaden wage growth. An extended TCJA could still deliver meaningful gains, but proactive policy is needed to ensure those gains benefit all Americans, not just those at the top.

TCJA: A boost for poorer Americans: Meanwhile, FREOPP Senior Fellow Michael Tanner examined the broader effect of the TCJA on low-income Americans and found that they were among its biggest beneficiaries. While high earners received larger cuts in absolute terms, low-income workers saw the greatest reductions as a percentage of taxes paid, thanks to lower rates, a doubling of the standard deduction, an increase in the Child Tax Credit, expanded 529 savings accounts, and more. In fact, workers in the bottom half of incomes saw a 9.3 percent reduction in their tax burden, compared to 3 percent for the top 10 percent of earners. With the caveats that today is a different economic context than 2017 and that ballooning federal spending overall could undercut the TCJA’s benefits, Michael contends that letting the Act expire would risk undermining economic progress, particularly for low-wage workers.

As school choice bills pass, Congress and states can help create more options: This legislative session, Texas enacted a new $1 billion education savings account (ESA) program. In RealClearEducation, FREOPP Senior Fellow Dan Lips explains that, as these programs expand parent demand, policymakers should support the private and alternative education options that will help meet it. States like Tennessee are pioneering measures such as protecting learning pods from regulation, while the federal government could leverage existing programs like employer tax credits for child care to support microschools. Creative solutions like these would enable the private sector to meet rising demand and ensure families have meaningful educational choices.

Other education highlights from Congress? New legislation from House Republicans would establish a $5 billion tax credit to create education scholarships and expand allowable uses of funds in 529 accounts. Dan and FREOPP Resident Fellow Michael Toth make the case in The Hill that using Title I funds to seed those 529 accounts for low-income families would do even more to expand access to educational options.

Thanks for keeping up with FREOPP, and have a great weekend!

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