The Trump administration is pushing forward with a variety of measures that would cap U.S. drug prices at the artificially low levels set by other countries. It has proposed two Medicare "demonstrations" that would import these "Most Favored Nation" price controls for certain. And it's pressuring Congress to put these price controls into law.
There's no question that the United States shoulders a disproportionate share of global investment in drug research and development, because other wealthy nations pay far less and effectively free-ride on U.S. medical breakthroughs.
But adopting those nations' budget-before-breakthrough mentality won't fix the problem. It'd only dry up the flow of capital that finances the discovery of new treatments.
America's life sciences leadership has delivered longer, healthier lives -- adding nearly a decade to U.S. life expectancy. Undermining that system risks not only our health but our global edge.
In the 1980s, Europe developed most new medicines. Now, it develops less than one-quarter of them. Heavy-handed price controls drove investment away. In 2023 alone, the United Kingdom missed out on an estimated £1.3 billion in pharmaceutical R&D investment compared to global growth rates due to government price controls.
Importing price controls means importing the mindset that produces them. Many OECD countries evaluate new medicines through bureaucratic cost-effectiveness formulas that try to put a price on life -- and discriminate against people with disabilities or rare or terminal conditions.
When treatments are deemed "too expensive" under these formulas, these countries' centralized health systems delay or deny access to them -- even when they represent the only hope for patients.
America has historically opted for a different path. Our life sciences ecosystem values risk and incentivizes research. Scientists pursue unproven ideas, investors fund early-stage treatments, and successful discoveries generate returns that support the next wave of cures. Meanwhile, U.S. patients routinely get earlier access to lifesaving therapies than those abroad.
And because policymakers have also incentivized the launch of cheap generic medicines, new medicines don't stay expensive forever. Today, 91% of U.S. prescriptions are generics, and Americans actually pay less per prescription filled than patients abroad as a result.
In other words, Americans are already getting the best of both worlds -- a system that spurs the development of lifesaving new medicines, while still ensuring that those treatments ultimately become extremely affordable.
Abandoning this system and adopting other nations' policies would jeopardize this investment.
In a recent Incubate survey, 92% of early-stage biotech CEOs said they're worried investors are already moving to less risky sectors amid recent policy shifts. Hundreds of companies have flagged Most Favored Nation pricing proposals in their quarterly reports as material risks that influence investor confidence and long-term planning. Roche has warned it may reconsider $50 billion in planned U.S. investments in response to these kinds of policies.
The reason is straightforward: drug development is long, risky, and resource-intensive, leaving little margin for error.
Look at the heart failure drug Entresto. Although the underlying therapeutic approach was first explored in 1980, Novartis didn't receive FDA approval until 2015 -- 35 years later. Today, the drug is available for about $1 a pill.
Under MFN, the decade of market exclusivity that makes such investments viable would be undercut from day one by artificially low prices. A multi-decade bet like Entresto's would become virtually impossible to pursue.
Small biotechs -- which produce most new drugs -- are especially vulnerable to this policy. They depend on investors willing to fund uncertain science for over a decade or more. That only works if the market rewards success.
In a recent roundtable my organization, Incubate, hosted with the National Security Commission on Emerging Biotechnology, life sciences investors from seed-stage to IPO issued a clear warning: if U.S. prices are tied to those set abroad, many drugs will become uninvestible, especially when manufacturing and development costs exceed those benchmarks.
Risk-taking has made the United States the engine of global medical progress. Preserving that edge means protecting the incentives that reward innovation -- so we develop and deliver the next generation of treatments here first, rather than ceding that advantage to rivals like China.
