OP-ED by Ross Marchand
Thanks to innovative medical advances, treatments for once-incurable diseases are steadily expanding and improving. KJ Muldoon’s parents discovered the marvels of modern medicine firsthand after their infant son was diagnosed with a deadly one-in-a-million Carbamoyl phosphate synthetase I (CPS1) deficiency that compromises the body’s ability to expel ammonia (a toxic compound). This deficiency is the result of a tiny error in the genetic code, but that small glitch kills half of the affected infants. Fortunately, doctors were able to save KJ’s life using a customized gene therapy that overrides the bug in the genetic code.
Game-changing therapies like this one can save millions of lives. But, these treatments will only come to market with the right incentives and assurances in place for innovators. By rejecting price controls and onerous approval rules, the Trump administration and lawmakers can pave the way for a revolution in life-saving treatments.
Medications are not cheap to bring to market. While the soup-to-nuts cost of developing a drug (including initial research, clinical trials, and regulatory approvals) is often cited as $2.6 billion, the true cost can exceed $4 billion depending on the therapeutic area. Policymakers have allowed producers to recoup these gargantuan investments by granting them a twenty-year patent exclusivity period for marketing and selling their therapies. However, the approval process eats up most of that patent window; research demonstrates that “companies often do not get a product to market before as much as half of that period has already elapsed.” As a result, it’s critical for manufacturers to have pricing flexibility in the exceedingly-short period of patent protection.
This pro-innovation pricing structure is constantly being undermined by reckless price controls. The 2022 Inflation Reduction Act (IRA) introduced Medicare drug price “negotiations” in which the government dictates artificially low prices to medication producers. As Taxpayers Protection Alliance Research Director David McGarry notes, “The IRA requires [the Department of Health and Human Services] to demand at minimum a 25%–60% discount from market rates, and it encourages the agency to gouge even deeper. … Should firms balk, they must either remove all their products from Medicare (Parts B and D) and Medicaid or submit to a so-called ‘excise tax.’” Unsurprisingly, this puts a significant damper on healthcare innovation. University of Chicago scholars estimate that these price controls will result in 135 fewer medications being brought to market through 2039.
Rather than try and reverse this terrible policy, President Trump has doubled down and attempted even larger price controls. President Trump signed an Executive Order on May 12 tethering U.S. drug prices to prices set by (mainly) European countries with socialized medicine. To examine the real-world impact of price controls, look no further than countries such as France and Germany that the U.S. wants to mimic. According to a report from the European Association of Hospital Pharmacists, an astounding 95 percent of surveyed European pharmacists experienced medication shortages in 2023 (the most recent year of analysis). More than half of these healthcare workers faced critical shortages ten times or more over the course of the year. Medications most frequently cited to be in shortage included antimicrobial agents (76 percent), painkillers (43 percent), and anesthetic agents (37 percent). The truth is that there is a very high cost to the supposedly low prices that European patients pay for drugs. Importing this pricing model will only import shortages, as producers decide bringing therapies to market is not worth the hassle.
Fortunately, policymakers don’t need to resort to price controls to bring prices down for consumers. Newly-minted FDA Commissioner Marty Makary has already announced he will be creating a new and cost-effective pathway for rare disease therapies to come to market. Hopefully, this includes additional regulatory flexibility for customized gene therapies.
The KJs of the world deserve a better future than the broken status-quo of red tape and price controls.
Ross Marchand is a senior fellow for the Taxpayers Protection Alliance.
