The myth that they have drives Biden’s proposals for price controls, which would throttle innovation.
Build Back Better may be dead, but its proposed drug price controls will likely reappear: negotiating prices for high-cost drugs in Medicare and price controls for most drugs limiting price increases to the annual inflation rate.
President Biden insists such controls are needed because pharmaceutical companies are “jacking up prices on a range of medicines.” He promises “to end the days when drug companies could increase their prices with no oversight and no accountability.” Yet while inflation has skyrocketed under Mr. Biden, drug prices are lower than when he took office. As the consumer-price index over the past year rose 6.8%, the largest increase in 39 years, prescription-drug prices fell 0.3%. . .
Mr. Biden’s proposed price controls aren’t merely superfluous. They risk lowering the number of innovative new drugs that improve health and eventually become the low-priced generics used by most Americans. . . University of Chicago economist Tomas Philipson estimates Mr. Biden’s proposed price controls could lead to a 29% to 60% reduction in research and development, resulting in 167 to 342 fewer new drug approvals over the next 20 years.
The rapid development of Covid vaccines and therapeutics confirmed the importance of preserving our innovative pharmaceutical industry. The pandemic also confirmed that the FDA is capable of safely shortening approval times. Speeding approvals and increasing competition are a far better prescription than price controls that would strangle future innovation.
Read the full op-ed here.