Reconciliation Bill Threatens Scientific Innovation
Science is no longer the red-headed stepchild of American capitalism.
For years, people accused biotech companies of price gouging and financial engineering. Critics claimed the industry cared more about lucrative "me-too" drugs than long-term research that yields truly innovative medicines.
But Covid-19 changed everything. The industry produced multiple extremely effective vaccines in record time – and in March saw a 62 percent approval rate in public opinion polls, up 30 percentage points from January 2020. People have finally recognized the importance of America's world-leading biotech industry. Most people, that is.
Some of our political leaders still haven't had that eureka moment. In fact, they're considering a proposal that would kneecap America's most innovative companies – and threaten not just investors and scientists, but patients too.
The biotech industry invests about $100 billion into U.S. pharmaceutical research and development each year. This staggering investment explains why U.S. labs produce half of all new medicines invented globally.
This innovation wouldn't be possible without a favorable policy environment. Unlike other developed countries, the United States does not currently impose price controls on medicines.
This wise restraint encourages investment in risky R&D ventures. It costs close to $3 billion, on average, to bring a new medicine to market. The vast majority of potential treatments fail in lab and animal testing. Of the few that show enough promise to enter clinical trials, only about one in eight proves safe and effective enough to merit FDA approval.
Investors know the odds of any particular research venture succeeding are dismally low. Yet they pour money into fledgling biotechs anyways, because a single successful medicine could deliver returns that more than make up for the losses on other, failed startups.
Congress could soon fundamentally alter that investment calculus. The House just passed a budget "reconciliation" bill, in which they've included sweeping changes to our healthcare system. If it succeeds in the Senate, the bill could give federal officials the power to effectively set drug prices in public insurance programs – like Medicare and Medicaid.
Lawmakers project this price-setting will save the government hundreds of billions of dollars over the coming decade – money that will come directly out of biotech companies' proverbial pockets. That inevitably would result in drastic cutbacks in R&D spending – and ultimately, dozens fewer drugs brought to market.
It would also harm patients almost immediately. There's simply no way for the government to save hundreds of billions in the short-term without limiting which medicines people can take.
The other advanced, Western democracies that set drug prices already ration access to medicines. Of new medicines introduced between 2011 and 2017, patients in Canada, France, and Australia had access to less than half – in Australia's case, just 33 percent. By contrast, close to 90 percent were available to American patients.
In drug pricing, just like in every other policy issue, there's no free lunch. Vastly less spending on medicines inevitably means less innovation and reduced access to cutting-edge treatments for patients.
Lawmakers would be unwise to make that trade. America's biotech industry is the envy of the world. It saved millions of lives – and the global economy – by rapidly developing Covid-19 vaccines. Gutting this sector in pursuit of some short-term government savings would sacrifice patients' health and undermine our ability to defeat not just the current pandemic, but future health crises as well.
John Stanford is executive director of Incubate, a Washington-based coalition of life-science venture capitalists.
