Democrats’ Scheme to Control Drug Prices A Burden to American Health Care

Democratic Party politicians often fancy themselves as a group that advocates science. However, two recent announcements reveal how ignorant they are about the science that moves from the laboratory and into our medicine cabinets.

First, Pfizer announced the results of its clinical trial for an antiviral treatment against COVID-19. The treatment resulted in a dramatic 90 percent reduction in hospital admissions for high-risk patients compared to the placebo. Amazingly, no one who received the treatment died.

The second announcement was that Democrats had reached an agreement to a measure that would cripple and eventually disrupt the life sciences investment system, which helps to make such breakthroughs possible.

The Democrats’ dangerous proposal would grant Medicare the power to set the price for certain drugs. The Dems call their price dictation plan “negotiation” but, like much of political language, this word choice is a deliberate lie. If the manufacturer declines to comply with the government’s demands, the arrangement gives the government all its leverage. The government can also impose a penalty tax equal to 95 percent on the gross sales of the drug.

Given that it takes an average of over $2 billion in investments and more than 10 years to develop a new drug, who would put their capital at risk if the government imposes a price for which there is no return on investment?

House Speaker Nancy Pelosi (D-Calif.) and Senator Bernie Sanders (I-Vt.) emphasized short-term dollar signs over long-term consequences for patients. However, moderate Democrats were able limit the drugs that are eligible for price dictation to those with an expiring exclusivity period. Even this compromise is flawed.

Generics and biosimilars are already a successful way to lower the cost of drugs beyond their exclusivity periods. Over the past decade, these brand-name alternatives have saved $2 trillion. According to the U.S. Food and Drug Administration, a drug’s cost will drop by almost 40% when a generic version is available. This drops by 80% when there are four or more generics.

The simplistic narrative of the Democrats and their cohorts states that the government funds science research, and then the big drug companies make a lot of money from it. They ignore the fact that dictating prices could scare off life science investors, who are vital for the second leg in the relay race for drug development. According to the Congressional Budget Office, 30 fewer drugs would be introduced in the next decade if the Democrats’ original price dictation scheme (HR3) was implemented.

“If price controls are enacted, the life sciences investment equation will no longer justify investment in R&D. Investment won’t just be reduced, it will drop off a cliff,” stated John Sanford, executive director of Incubate, a consolidation of venture capital organizations representing the patient, corporate, and investment communities. 

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