Issues & Insights
"Harris claims her policies will cut Medicare’s costs. But what she’s really doing is cutting the future cures that could save your life."
"As President Joe Biden and Democratic presidential nominee Kamala Harris tour the country touting cuts in prescription drug prices, the real costs will be in cures never invented. And you can already see that trend not only in drug companies cutting back on new-medicine development, but also in employee downsizing and the decline of small biotech and life-science companies where many of tomorrow’s drugs are developed today.
"The lifeblood of medical innovation is research and development (R&D) spending. Innovator pharmaceutical companies spend billions of dollars every year identifying, developing, testing and, hopefully, releasing potential cures. The vast majority of those drugs won’t make it through the U.S. Food and Drug Administration approval process. Those that do have greatly improved or saved countless lives.
"But the R&D process isn’t cheap, and the number of approved drugs can vary significantly by year. For example, the FDA approved 55 new drugs in 2023 (the second-highest annual number) but only 37 in 2022 and 50 in 2021.
"Most of those newly approved drugs were years, if not decades, in the making. And once they are released their patents may have only eight-to-10 years left before they are ripe for generic competition.
"Moreover, drug companies have been increasingly targeting some of the most difficult medical conditions and diseases, often requiring hard-to-develop biologics—large, complex molecules usually administered by injection—rather than a simple pill. Of those 55 new FDA-approved drugs in 2023, 17 were biologics. Of the 37 new drugs in 2022, 15 were biologics.
"The misnamed Biden-Harris Inflation Reduction Act (IRA) poses a real threat to new drug development. The law essentially imposes price controls on some of the most popular drugs in the Medicare program. Democrats boast that they are just forcing drug companies to “negotiate” drug prices. But the penalty for not accepting the government’s final price is severe—what the government calls an excise tax of up to 19 times the price of the drug, that’s 1,900% of the drug’s daily revenue.
"Given the restrictions and uncertainty that comes with price controls, drug companies will be more cautious with their R&D spending, and that’s exactly what we’re seeing." . . .
Merrill Matthews is with the Institute for Policy Innovation in Dallas, Texas.
