“There is simply no way for government fiat to force down costs without harming innovation, especially at the startups and small biotechs,” writes Craig Garthwaite of Northwestern University’s Kellogg School of Management and director of its Program on Healthcare in a new op-ed.
Democrats’ price-fixing scheme would kill up to 342 cures, according to a study by the University of Chicago, yet they claim it’s merely a “negotiating” approach that would lower the price of drugs.
A new study from Vital Transformation finds that if drug price controls under consideration in the Senate had been enacted during the last decade, only six of 110 currently approved therapies would have made it to patients.
Price controls eliminate incentives to innovate:
- By decreasing the returns investors can expect on successful drug launches, they limit investment in innovation and deprive people of access to future medicines.
- “If a cure for cancer, or Alzheimer’s, or ALS is ever developed, it will probably come from a startup backed by venture capital. Trimming these potential rewards decreases the incentive to invest. This is particularly true when price controls target exceptionally high-revenue products — the ‘big wins’ that are necessary to justify the inevitable losses that come along the way.”
By adding red tape, Democrats limit smaller firms’ flexibility in developing new cures:
- Small companies partner with larger firms so they can focus on innovation while the larger firms handle other aspects of drug sales. Democrats would punish these business decisions.
- “Democrats implicitly acknowledge the potentially far-reaching harms of their policies, because they attempt to temporarily exempt small firms from the price controls for a limited time — but only if those small companies develop a drug and bring it to market themselves, rather than partnering with bigger pharmaceutical companies.”
- “Forcing small firms to undertake commercialization efforts to avoid price controls would further raise the cost of drug development and decrease the flow of potential products to the market.”
- “These small labs are often pursuing a single promising treatment. They have no intention of trying to join the ranks of pharmaceutical behemoths. Instead, investors in these firms hope to exit their investments by either selling the company to a bigger firm or partnering with one once an experimental treatment shows potential.”
Short-term solutions will prove disastrous for future cures:
- “ …Few rational investors would believe that this introduction of price controls will be the only bite at the proverbial apple.”
- “It is time for Democrats to face the brutal economic fact that any system of price controls will harm future innovation and to instead engage in an honest debate about whether the reduced flow of new drugs is worth some savings today.”