Congress Should Avoid Undermining Healthcare Innovation

By: Elaine Parker and CL Gray

Appeared in RealClear Policy on September 8, 2021


Dr. Anthony Fauci recently warned that the country’s coronavirus pandemic won’t be under control until the spring of 2022. The Biden administration touts the vaccines, and perhaps new booster shots, as the key ingredient to make it happen. Given that doses are widely available on a voluntary basis, I think most would agree with that sentiment. 

While the White House and many members of Congress are rightly putting all their proverbial eggs into the vaccine basket, policy proposals currently being considered in Washington would be an exercise in self-sabotage. Lawmakers are floating ideas that would undermine the very companies that make these pharmaceutical innovations possible. 

Exhibit A is the $3.5 trillion budget reconciliation bill. Buried in the package is a provision that would drain research and development budgets that are required to create new lifesaving drugs, therapies, and, yes, vaccines. Proponents are selling the change as a way to lower prescription drug costs accessed through Medicare Part D. But the devil is in the details. 

In practice, the policy will implement a price ceiling on domestic pharmaceuticals — a cap that will be based on a proportion of what foreign countries pay for the same product. A good idea in theory if everyone is playing by the same rules, but that’s not the case. Many countries that would be included in the indexing group already have artificially low drug prices because of government-run healthcare systems. If government is the sole buyer of medicine in a country, they hold all the cards and can pay below market price.   

Indirectly applying the same price control scheme in the U.S. would lead to big problems. While the price of some drugs may drop in the short-run, those advantages would quickly be negated after falling revenue for drug companies translates to fewer new medicines brought to market. In fact, the previous administration estimated the change could result in 100 fewer pharmaceuticals becoming available to the public over the next 10 years. 

What happens when the next pandemic or major health emergency comes our way? 

Instead of sacrificing innovation to lower drug costs, Congress should address the middlemen of the drug supply chain who jack-up the price of medicine consumers pay at the pharmacy counter. These middlemen, called Pharmacy Benefit Managers, game the system to pocket tens of billions of dollars per year that should have gone to patients as financial savings. It’s a strategy the Job Creators Network Foundation and Physicians for Reform have been pursuing through the Healthcare for You reform framework. 

Both the White House and a majority in Congress have so far been hesitant to tackle this racket. But hopefully, with some grassroots encouragement, they’ll come around.   

To add insult to injury, proposals to help pay for massive government spending packages will tighten pharmaceutical research budgets further. One idea being floated by the Biden administration is to increase the corporate tax rate by 33 percent. Not only will the change negatively affect more than one million small businesses, but the extra financial burden will slow the pipeline of medical advancements even more. 

The miracle of modern medicine has been on full display amid the coronavirus pandemic. Lawmakers need to avoid undermining the very businesses that make these innovations possible. Or else, patients will be paying for the mistake down the road. 

Elaine Parker is the President of the Job Creators Network Foundation. Dr. C.L. Gray is the President of Physicians for Reform.