What do you get when you cross a self-proclaimed socialist with a U.S. Senate committee gavel?
You get legislative power used to push price controls, extensive regulation and “show trial” hearings and official reports designed for political effect and to cripple highly innovative economic sectors.
Evidentiary exhibit #1: Sen. Bernie Sanders, chairman of the Senate Health, Education, Labor and Pensions Committee, and his crusade against the U.S. biopharmaceutical sector.
Sen. Sanders demands a “reasonable pricing” requirement for federal research funding that leads to a marketable “drug, biologic, or other health care technology.” He and other lawmakers who’ve turned drug pricing into a bloody shirt are pressing for this measure as part of the otherwise bipartisan Pandemic and All-Hazards Preparedness Act reauthorization or Majority Leader Chuck Schumer’s drug pricing legislation.
This legislative demand continues a string of Sanders showmanship berating and attacking successful medical breakthroughs—and the innovators who’ve achieved these successes amidst paths fraught with trial and error.
For example, Sen. Sanders’s HELP staff produced a June 12 report titled “Public Investment, Private Greed.” It purports that the U.S. government’s funding of basic research, the stage where essential scientific discoveries that hold the potential of practical use are made, should constrain the prices of eventual products.
This report takes liberties that distort facts, such as using terms like “invents” in connection with basic discoveries by government scientists. Exceptional cases are made to appear the norm, such as additional collaboration and funds during public health emergencies to bring a drug through Food and Drug Administration approval and to market.
The report skates past inconvenient details. For example, it simplistically compares the American means of rapidly bringing medical innovations to patients with government-run health systems in other countries. Those health systems dictate unreasonably low prices, keep many new treatments unavailable and deny the most vulnerable patients access to new drugs.
Sen. Sanders wants to peg U.S. drug prices to artificially low, government-set ones. And he calls for a “reasonable pricing” clause in National Institutes of Health licensing agreements.
This would repeat the tried-and-failed NIH CRADA experience of the 1990s. The Bayh-Dole Coalition warns, “We've been down this road before, and it was a disaster.” The Sanders staff report tries, but can’t explain away these facts.
In 1989, NIH started requiring a “reasonable pricing” provision in its Cooperative Research and Development Agreement federal contracting vehicle as a condition for an exclusive license to NIH-funded technologies. The clause injected uncertainty, diminished IP value and undermined property rights over any eventual product.
The pricing requirement caused a significant drop in NIH CRADAs. They fell from 42 in 1989 to an average of 32 the next six years. This drop-off in CRADAs led NIH to eliminate the provision. CRADAs with NIH immediately shot up to about 90 agreements in 1996 and more than 160 in 1997.
When the government price control was removed, NIH Director Harold Varmus said “the pricing clause has driven industry away from potentially beneficial scientific collaborations with [NIH] scientists without providing an offsetting benefit to the public. . . . Eliminating the clause will promote research that can enhance the health of the American people.”
In 2021, NIH assessed this episode and squarely attributed the plunge of the 1990s to the “reasonable pricing” clause and the uptake to its removal.
It would be foolish for any reasonable lawmaker to support government price control schemes. Too many have already unwisely enacted drug price controls in the “Inflation Reduction Act.”
The IRA’s government drug price “negotiation” (i.e., dictation) will result in over 235 fewer new medicines and eliminate 1.1 million jobs. It’s already undercutting R&D into biomedical breakthroughs.
The honest truth is that government price controls, including a “reasonable pricing” clause, harm patients and American innovation.
Then NIH Director Varmus put it best: “The [price control] clause attempts to address the rare breakthrough product at the expense of a more open research environment and more vigorous scientific collaborations. One has to have a product to price before one can worry about how to price it, and this clause is a restraint on the new product development that the public identified as an important return on their research investment.”
Amen!