A Tragic Day for American Patients
By Peter J. Pitts
The Biden administration recently announced the first 10 drugs that will be subject to price controls under the disingenuously named Inflation Reduction Act (IRA). This misguided policy will restrict patient access to existing medicines and stifle the development of new ones.
While this year-old law's supporters frame it as a blow against Big Pharma's profits, the IRA's real victims will be everyday people. Decades of experience prove that government-imposed price controls eventually reduce incentives for innovation and inhibit patients' access to drugs.
The dismal equation is simple: Medicare price controls will reduce revenues for pharmaceutical companies. This, in turn, will limit their investment in new treatments. With less incentive to devote the billions of dollars required to develop new medicines, pharmaceutical companies will divert money and manpower away from high-risk research areas like Alzheimer's, cancer, and heart disease.
We must not forget that bringing a new drug to market requires immense investment, time, and risk. Each new medicine averages almost $3 billion in research outlays and 10 to 15 years of development in cutting-edge laboratories. This steep cost stems from both these direct expenses and the reality that only one in 10 drug candidates that enter clinical trials win FDA approval. Investors wager capital on microscopic strands of unproven molecules because the profit potential of a successful drug justifies these huge rolls of the dice.
Unfortunately, price controls disrupt this risk-reward calculus. This heavy-handed government intervention undermines the chances of recouping development costs and earning any profit beyond that.
This is especially true for small-molecule drugs, since the IRA's controls can kick in just nine years after FDA approval instead of 13 for biologics. Half of a drug's lifetime revenue generally comes after its ninth year on the market. By imposing these controls, the government has made new small-molecule drugs potentially half as valuable -- a surefire way to discourage investment in new research in small-molecule treatments, which normally come in the form of easy-to-use pills rather than injections or infusions that require patients to travel to a clinic.
And the damage won't stop at the 10 drugs in the White House's immediate crosshairs. Next year, the government will select 15 additional medicines for price controls. Then another 15 the year after that. Then 20 the year after that.
By the end of the decade, virtually every top-selling medicine that isn't a recent release will be subject to price controls.
Rather than empower Washington bureaucrats, better solutions could limit costs without jeopardizing innovation.
Eliminating barriers that generic and biosimilar versions of brand-name drugs face before they enter the market would increase competition and reduce prices. Reforming FDA regulations to accelerate approval for certain drugs also would speed less expensive medicines to patients.
Unfortunately, the Inflation Reduction Act takes the opposite approach. Americans will pay for this short-sighted mistake through diseases uncured and lives unimproved. Washington's price controls will cast a long and dark shadow over the future of medicine and place promising therapies just around an ever-receding corner.
Peter Pitts is a former associate commissioner of the Food and Drug Administration and President of the Center for Medicine in the Public Interest. This piece originally ran in Townhall.
