“The [Inflation Reduction Act]’s false promises will eventually be proven hollow—and extremely costly,” a recent Locke’s Notebook blogpost warned.
That blog warned about the IRA’s government price-setting (which, if done by private entities, would be called “price-fixing,” a per se violation of antitrust laws) of pharmaceutical prices and its extortionate 95% tax on drug revenues above the inflation rate.
Well, at the risk of tooting CPR’s own horn, we were right.
Several instances of biopharma innovators cutting back or ending promising new drug projects have already occurred. A recent industry survey about the IRA’s adverse effects provides strong evidence that these aren’t merely a few anecdotal moves. The survey finds:
“78% [of innovative drug firms] expect to cancel early-[stage] pipeline projects.
“63% said they expect to shift R&D investment focus away from small molecule medicines.
“95% said they expect to develop fewer new uses for medicines because of the limited time available before being subject to government price setting.
“82% or more of companies with pipeline projects in cardiovascular, mental health, neurology, infectious disease, cancers and rare diseases expect ‘substantial impacts’ on R&D decisions in these areas.”
Let’s be clear: The climate-extremist, wokeness-advancing, socialist policy, massive wasteful spending package that every Democrat in the 117th Congress voted for and nearly every Senate and House Republican voted against enacted property rights-stomping price controls. Those policies are already causing cancellation of existing drug development, reduction of future R&D on drugs that are often taken orally, curtailment of identifying diseases that existing medicines would combat, and tough decisions on R&D for new drugs that would treat or cure a range of illnesses.
The severe consequences the IRA is inflicting on biopharmaceutical innovation (which relies on massive amounts of private investment capital) are only the toxic firstfruits.
Government-run health systems—complete with government price controls—in Europe have some of the same price controls in place as those in the IRA. European patients bear the consequences most directly and harshly. And European price controls have squeezed so much of the juice from the fruits of biopharma innovators’ labor that it’s driving drug firms away.
Eli Lilly and AbbVie can no longer sustain participation in a 2019 agreement with the UK, the Wall Street Journal notes. Bayer, Bristol Myers Squibb and Bluebird are also reducing their business in European countries. As Bayer put it, the German drug innovator is “deprioritising Europe to some degree.”
Again, the sick and infirm pay the price of these antiproperty-rights policies most acutely. While Americans enjoyed access to 85% of newly launched medicines from 2012 to 2021, Europeans’ government price controls and socialized medical systems dramatically constrained access to new drugs: just 59% of new medicines accessible in the UK, 62% in Germany, 52% in France.
And now, the European Union is loading more bullets into the cylinders of Europe’s Russian roulette pistol. “. . . European governments refuse to pay more to ensure their citizens have access to treatments. Bureaucrats in Brussels are therefore now considering legislation that would reduce intellectual property protection for drugs that don’t launch in nearly all European Union markets. Such a deal: Accept price controls, or Europe will hand IP to the Chinese.”
There’s something even more chilling than the EU’s heavy-handed threat here. It’s that the U.S. politicians who put together or voted for the IRA have sown the very seeds that could eventually kill the innovator goose that lays golden eggs of the treatment and cure variety.
Americans, beware: “Cheap” drugs (i.e., politically dictated, economically constrained private enterprise and property rights) come at a very expensive cost. Just ask the half of European patients whose government health system denies them access to the medicines they need.