Freedom Line Blog

Following up on our latest Liberty Update commentary highlighting the deepening disaster that is the Biden Administration healthcare and pharmaceutical policy, The Wall Street Journal notes that prescription drug prices have actually ACCELERATED their price inflation since Biden’s so-called “Inflation Reduction Act”:

Prescription drug prices increased by 2% during the Trump Presidency owing to greater generic competition, yet they’ve increased 5.5% so far under Mr. Biden. In November they rose at an annual rate of nearly 6%. Has the White House considered that the reason Americans don’t believe that the President’s policies have helped them is because they haven’t?”

The Biden Administration needs to correct course for the benefit of Americans, not double down.  But time is running out.

CFIF recently marked the ignominious one-year anniversary of the Biden Administration’s misnamed “Inflation Reduction Act” (IRA), whose title even Biden himself admitted was mistaken.

We noted how, as a result of the IRA, drug shortages have already reached record highs, increasing by 30% between 2021 and 2022 alone, according to a report in March from the Senate Committee on Homeland Security and Governmental Affairs.  Another report from the American Cancer Society also sounded the alarm on emerging drug shortages, caused in part by drug price control policies.  Thus, just one year in, drug shortages have reached record levels under the looming threat of drug price controls, weaker intellectual property protections and regulatory browbeating.

This week, as reported by Politico, the same Biden Administration that called inflation “transitory” and insists in the face of public blowback that “Bidenomics” is somehow succeeding announced that it will soon release the first ten prescription drugs selected for its destructive price control scheme:

President Joe Biden has sought to sell health policies like the new Medicare negotiation program as part of a broader ‘Bidenomics’ agenda set to underpin his reelection campaign.  The drug pricing push, he has argued, will help counter inflation and boost the economy by slashing the amount Americans have to shell out each year for critical medicines, although prices negotiated on the first set of drugs won’t take effect until 2026.”

Given Biden’s shoddy record for accuracy and competence so far, Americans will be forgiven for their skepticism.  As we noted, the consequence of price controls will be shortages and less innovation, which we’re already witnessing.  Americans aren’t buying this “Bidenomics” pitch, and will pay a heavy price unless and until these dangerous drug price controls are reversed.

“The record of price controls goes as far back as human history.  They were imposed by the Pharaohs of ancient Egypt.  They were decreed by Hammurabi, king of Babylon, in the eighteenth century B.C.  They were tried in ancient Athens.” -Henry Hazlitt

Today marks the one-year anniversary of Joe Biden’s misnamed “Inflation Reduction Act” (IRA), which even he now admits shouldn’t have carried that title.

Beyond Biden’s own regrets, however, Americans deserve to understand its destructive impact on our healthcare system and world-leading pharmaceutical innovation sector.

Namely, our traditional market-based approach has resulted in an unrivaled legacy of pharmaceutical innovation and abundance relative to the rest of the industrialized world.

For example, the United States accounts for approximately two of every three new lifesaving drugs introduced worldwide, meaning that we alone create twice as many new drugs as the entire world combined.  As another illustration, American consumers enjoy a substantially higher availability of critical drugs compared to people in other advanced economies.  Of 270 new medicines introduced domestically since 2011, only 52% of them were available to our neighbors just across our northern border in Canada, 41% in Australia, 48 % in Japan, 53% in France, 64% in Britain and 67% in Germany.

Destructive drug price controls, however, maintained an illogical appeal for the Biden Administration and the political left.

They can’t say that they couldn’t have foreseen the downsides of the IRA.  Amid debate over broad drug price controls back in 2021, a University of Chicago study warned of their potential negative impact on future drug innovation and availability:

The United States has far fewer restrictions on price than other countries, but the Biden Administration has announced their goal to lower drug prices through greater price regulation. …  [N]ew drug approvals will fall by 32 to 65 approvals from 2021 to 2029 and 135 to 277 approvals from 2030 to 2039.  These significant drops in new drug approvals will lead to delays in needed drug therapies, resulting in worse health outcomes for patients.  

Several years earlier, even the United Nations World Health Organization (WHO) similarly warned about the consequences of government price controls and intellectual property violations:

[P]rice controls, combined with the threat of market lockout or intellectual property infringement, prevent drug companies from charging market rates for their products, while delaying the availability of new cures to patients living in countries implementing those policies.  

Disregarding those warnings and textbook economic logic, the Biden Administration and Pelosi-Schumer Congress plowed ahead with the IRA, whose drug price control provisions President Biden bizarrely trumpets as a 2024 reelection theme.  From branded drugs to off-patent older generics, the Biden Administration accelerated government efforts to artificially target drug prices, oblivious to the foreseeable consequences.

We’re now suffering the consequences of that agenda.

Drug shortages have already reached record highs, increasing by 30% between 2021 and 2022 alone, according to a report earlier this summer from the Senate Committee on Homeland Security and Governmental Affairs:

Shortages of critical medications continue to rise – including drugs used in hospital emergency rooms and to treat cancer, prescription medications, and even common over-the-counter treatments like children’s cold and flu medicine.  The number of active drug shortages in the U.S. reached a peak of 295 at the end of 2022. …  Between 2021 and 2022, new drug shortages increased by nearly 30 percent.  At the end of 2022, drug shortages experienced a record five-year high of 295 active drug shortages.  

Separately, a new report from the American Cancer Society warns of emerging drug shortages, caused in part by drug pricing policies:

Chemotherapy drugs used to treat cancer are increasingly in short supply and have returned to the list of top-five drug classes affected by shortage.  Expanded demand, supply shortages, limited manufacturing capacity, and low profit margins for generic therapies are among the factors resulting in the current nationwide shortage.  …  A number of the drugs included in the shortage don’t have an effective alternative.  As first-time treatments for a number of cancers, including triple-negative breast cancer, ovarian cancer and leukemia often experienced by pediatric cancer patients, the shortage could lead to delays in treatment that could result in worse outcomes.  

Accordingly, drug shortages have reached record levels under the looming threat of drug price controls, weaker intellectual property protections and regulatory browbeating.

Instead of perpetuating the IRA’s spiral of price control insanity, elected leaders should return to the more market-oriented approach that brought unrivaled innovation before more Americans pay the needless cost.

For years we’ve warned how drug price controls – as with price controls on any product or service – don’t reduce prices so much as they inevitably cause shortages and stifle innovation.

Europe and other advanced economies imposing socialized drug price controls suffer dramatic shortages compared to the traditionally more market-oriented United States, and now in the wake of the misnamed “Inflation Reduction Act” (IRA), the U.S. is already experiencing unprecedented drug shortages.

This is literally a matter of life and death.

A new analysis from Vital Transformation offers the latest detail on how the IRA’s drug price controls, and the proposed “Smart Prices Act” (SPA) seeking to expand them, will stifle innovation in the field of lifesaving pharmaceuticals:

Looking forward, we estimate that the expanded government price setting could result in roughly 230 fewer FDA approvals of new medicines over a ten-year period, once the impacts are fully reflected in the pipeline.  Impacts will be felt most heavily in many areas of unmet need, including rare disease, oncology, neurology, and infectious disease.”  (Emphasis added.)

Indeed, Vital Transformation’s study illustrates how many of the drugs currently targeted by the IRA’s price controls would’ve never come to market had the price controls existed at the time:

Had the drug pricing provisions of the SPA been in place prior to the development of today’s top-selling medicines, we estimate that 82 of the 121 therapies we identified as selected for price setting would likely have not been developed.”

In addition to price controls’ impact on lifesaving drug innovation, the new study also helpfully highlights the negative economic and job effects of these price controls on the U.S. economy and employment market:

We modeled the impacts on industry revenues and future R&D investments and estimated future lost innovation impacts including the impact on industry jobs.  We estimate a loss of between 146,000 – 230,000 direct biopharmaceutical industry jobs and a total of 730,000 – 1,100,000 U.S. jobs across the economy if the proposed IRA expansion were to be implemented.”

All of this, of course, simply confirms what analysts have known for decades.  A 2021 University of Chicago study warned in equally stark terms how drug price controls will dangerously reduce drug innovation and availability:

The United States has far fewer restrictions on price controls than other countries, but the Biden Administration has announced their goal to lower drug prices through greater price regulation.  …  [N]ew drug approvals will fall by 32 to 65 approvals from 2021 to 2029 and 135 to 277 approvals from 2030 to 2039.  These significant drops in new drug approvals will lead to delays in needed drug therapies, resulting in worse health outcomes for patients.”

Believe it or not, even the United Nations World Health Organization (WHO) issued the same warning of the deadly consequences of government price controls and weaker patent protections:

[P]rice controls, combined with the threat of market lockout or intellectual property infringement, prevent drug companies from charging market rates for their products, while delaying the availability of new cures to patients living in countries implementing those policies.”

The evidence and real-world impacts are frankly beyond dispute.  Accordingly, it’s now up to reasonable members of the U.S. Senate and House of Representatives to oppose Joe Biden’s proposed 2024 budget and the SPA and avert the predictable deadly economically destructive consequences.

Generally speaking and on a wide array of pressing issues, Congressman Darrell Issa (R – California) has proven a reliable leader who maintains solid support among conservatives and libertarians.

The prospect of Rep. Issa leading the House Judiciary Committee’s Courts, Intellectual Property, and the Internet Subcommittee, however, has sparked significant opposition and pushback from intellectual property (IP) proponents.  And for sound reasons.

For example, in urging new House Judiciary Committee Chairman Jim Jordan (R – Ohio) not to select Rep. Issa for the role, IPWatchdog’s Paul Morinville lists a litany of concerns based upon Issa’s record:

Issa is the wrong person for the job and has demonstrated that since he joined Congress.  He has sponsored and cosponsored numerous bills that harm small entities for the benefit of Big Tech and Chinese Communist Party (CCP)-controlled multinational corporations.  He was one of the key drivers of the passage of the America Invents Act (AIA), which created the Patent Trial and Appeal Board (PTAB), the entity that now invalidates 84% of the patents it fully adjudicates.  He has ignored other problems like eBay v. MercExchange, which highly restricted injunctive relief, and Alice V. CLS Bank, which unleashed a demon into the patent system called the ‘abstract idea.’  This trifecta of damage has radically reduced the funding of startups by devaluing the only asset capable of attracting investment: patents.

More broadly and equally troublingly, Rep. Issa conceptualizes IP and Congress’s role in protecting it in an agnostic and passive way, as reconfirmed recently by spokesman Jonathan Wilcox:

As long as there have been patents, there have been disputes about how to regulate them.  Congressman Issa believes from decades of experience the system has too many loopholes that allow litigation and lawsuit abuse to stifle innovation.  Every IP reform he has achieved is to make the system more fair to everyone.

The fact that Rep. Issa views his potential chairmanship as an opportunity to increase government regulation illustrates precisely why the prospect of him leading this important subcommittee has generated such considerable and unified pushback from the IP community.  Patents are a constitutional and natural right, not a platform for increasing government control.

Moreover, centuries of American experience and success tell a different story than he suggests.

Throughout our history, America’s system of strong IP protections has made us the most innovative, prosperous nation in human history, without any close competitor.  From Alexander Graham Bell to Thomas Edison to the Wright brothers, from the film industry to the music industry, from lifesaving pharmaceuticals to software, from the telephone to the television, no society parallels our astonishing record of innovation, influence and prosperity.

That occurred by design, not coincidence.

Namely, our Founding Fathers considered IP a natural right and specifically drafted the Constitution to protect IP in a robust manner.  Even before they drafted and ratified the Bill of Rights, they specifically included IP protection in the text of the Constitution.  Article I, Section 8 provides that, “Congress shall have Power … To promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries.”

That obviously creates an active, affirmative Congressional duty, not some sort of passive or optional authority as suggested by advocates of weaker IP laws.

The Founders recognized that, as with every other type of property, protection of IP recognized individuals’ inherent right to the fruits of their own labor while also incentivizing productive activity.  As James Madison, the Father of the Constitution, emphasized, “The public good fully coincides in both cases with the claims of individuals.”

Similarly, former patent attorney Abraham Lincoln observed that, “The patent system added the fuel of interest to the fire of genius in the discovery and production of new and useful things.”

And as the Supreme Court confirmed a century after that, “encouragement of individual effort by personal gain is the best way to advance public welfare through the talents of authors and inventors,” while “sacrificial days devoted to such creative activities deserve rewards commensurate with the services rendered.”

Accordingly, America’s strong historical protection of IP rights reflects both the importance of economic incentives – the utilitarian angle – as well as the recognition that free people possess a natural right to the fruits of their labor and investment.

Today, the total estimated value of American IP measures approximately $6.6 trillion, which standing alone exceeds the economies of every other nation in the world.  Our IP industries also account for 52% of all U.S. exports, and employ nearly 50 million workers whose average annual earnings exceed non-IP workers’ wages by nearly 30%.

Both at home and abroad, however, our unparalleled system of strong IP rights remains under deliberate assault.

Overseas, nations with weaker IP laws seek to pressure the U.S. to surrender IP protections, such as with our world-leading Covid vaccines and treatments.

And here in the U.S., skeptics and special interests who seek to weaken IP rights claim that the Constitution’s IP protections are utilitarian in nature, as opposed to natural rights.

The obvious flaw in that claim is that utilitarianism obtained more widespread popular currency decades after the Founding Fathers drafted the Declaration of Independence and Constitution.  They were steeped not in cold utilitarianism, but rather the natural rights theories of John Locke, who observed that, “a person rightly claims ownership in her works to the extent that her labor resulted in their existence.”

Even accepting for the sake of argument, however, that America’s IP protections arose from solely utilitarian rather than natural rights ideals among the Founders, the simple fact is that one cannot identify an alternative IP system in the world today, or throughout human history, that has resulted in greater utility than our own.

That’s why IP matters, and why we must maintain and strengthen America’s system of IP protection, not undermine it.

It’s therefore important that new House Judiciary Committee Chairman Jim Jordan take this to heart in determining who will lead the critical House subcommittee on Courts, Intellectual Property, and the Internet.

We at CFIF often warn how attempts at “drug price controls” will only succeed in killing lifesaving drug innovation, in which the U.S. leads the world without a close second.

Joe Biden’s so-called “Inflation Reduction Act” constitutes a perfect illustration, and in a Wall Street Journal piece entitled “The Inflation Reduction Act Is Already Killing Potential Cures,” USC Schaeffer Center for Health Policy & Economics fellow Joe Grogan shows how “we’re already getting signs of the damage”:

One poorly crafted provision is driving companies away from research into treating rare diseases.  In its Oct. 27 earnings statement, Alnylam announced it is suspending development of a treatment for Stargardt disease, a rare eye disorder, because of the company’s need ‘to evaluate impact of the Inflation Reduction Act.’  Alnylam’s decision turns on a provision in the Democrats’ bill that exempts from price-setting negotiations drugs that treat only one rare disease.  The company’s drug is currently marketed as treating only amyloidosis, and thus is exempt from Medicare’s price setting.  If Alnylam proceeded with research into treating Stargardt, it would lose its exemption.”

And that’s not even the end of it.  Earlier this week, Eli Lilly announced termination of a blood cancer drug because, “In light of the Inflation Reduction Act, this program no longer met our threshold for continued investment.”

Mr. Grogan proceeds to offer a must-read primer on how and why this is happening, then concludes by admonishing the next Congress convening in January to abandon this instant disaster and promote innovation instead of cheap Biden Administration talking point schemes:

The Democrats may have achieved a short-term talking point for the midterm elections, but in the long term this partisan healthcare bill will prevent patients from receiving innovative, lifesaving treatments.  A new Congress would serve Americans well by replacing the Inflation Reduction Act with an approach that recognizes the need for economic incentives to bring new treatments to patients.”

Good advice.

For a man who constantly claims to support “Buy American,” Joe Biden demonstrates an inexplicable and almost fetish-like tendency to undercut American industries.

Since day one, the Biden Administration has ceaselessly besieged a domestic energy sector that finally achieved U.S. energy independence after decades of effort.  And now, it is following through on its inexcusably foolish assault against the U.S. pharmaceutical sector.

Each year, American pharmaceutical innovators account for an astounding two-thirds of all new lifesaving drugs introduced worldwide.  That’s the direct result of our system of intellectual property (IP) protections, including patents, which consistently leads the world.

Instead of protecting that legacy of American Exceptionalism, however, the Biden Administration remains bizarrely determined to eviscerate it.  Today, the World Trade Organization (WTO) announced agreement to forcibly waive patent protections for Covid vaccines, a dangerous effort that the Biden Administration for some reason supports.

This is nothing short of a license to steal U.S. patents.

The WTO effort serves no valid purpose, because Covid treatments are already being provided to poor nations across the world and the underlying pharmaceutical patents it targets are already being licensed at reduced prices or even for free.  Moreover, the  nations that the WTO claims to help recognize that lack of immunizations stems not from vaccine shortages, but rather from local logistical distribution problems and vaccination hesitancy among unvaccinated people in those nations.  Indeed, biopharmaceutical manufacturers remain capable of producing 20 billion vaccine doses this calendar year, so the problem isn’t lack of vaccine availability.

Additionally, a  supermajority of American voters spanning the political spectrum oppose this forcible waiver of Covid vaccine patents, favoring instead the licensing of patents to boost the global supply of vaccines.  Specifically, over 70% of voters believe that waiving Covid vaccine IP could have significant negative implications on the safety and efficacy of supply.

American patent protections explain our unmatched record of innovation, and also why we produce the overwhelming share of new drugs worldwide.  As the pandemic demonstrated once again, that includes Covid vaccines.  The WTO proposal egregiously sacrifices U.S. property rights and undermines the rule of law, which in turn will mean fewer lifesaving vaccines and treatments in the future.  If the Biden Administration won’t correct course, Congress must intervene to do so.

CFIF has continuously sounded the alarm on dangerous drug price control efforts, which will only do what artificial price controls always do – cause shortages of the very products they attempt to regulate.  The numbers speak for themselves.

Today, The Wall Street Journal editorial board cogently addresses the looming bankruptcy of Medicare and Social Security, and along the way nicely makes that point that we and others have been making, while also pointing out that drug prices have actually remained flat while prices for other products and services have skyrocketed:

Democrats blame Big Pharma for bankrupting Medicare, but annual Part D prescription drug costs have grown on average 1% over the last five years.  That’s far less than inflation, GDP and other Medicare spending. Even expensive drugs that grow spending in the short run can reduce long-term health spending.

Consider Hepatitis C treatments, which public-health scolds lambasted as too pricey when they launched nearly a decade ago.  Prices have since plummeted 75% from about $100,000 per course thanks to market competition.  A Department of Health and Human Services analysis estimates the treatments reduce patient health costs by about $16,000 annually and will save Medicaid $12 billion after this year.

Once the hospital trust fund runs dry, spending will have to be slashed by 10%.  The Democratic solution is to let Medicare “negotiate” drug prices — their euphemism for price controls.  But this will reduce the incentive to develop innovative treatments for hard-to-treat conditions like Alzheimer’s.  The result may be higher Medicare spending over the long term.“

Artificial government efforts to impose price controls never work, whatever the product, whatever the time and whatever the flimsy rationalization.  America leads the world in producing lifesaving pharmaceuticals – 2/3 of all new drugs introduced worldwide, in fact – so we mustn’t tolerate Biden Administration or Congressional efforts to try this failed proposal yet again.  The stakes for us all are too high to re-learn that lesson the hard way.

This week, the Biden Administration’s United States Trade Representative (USTR) Katherine Tai appeared before the Senate Finance Committee and House Ways and Means Committee, offering an important opportunity to rally opposition to the administration’s agreement with a misguided proposal in the World Trade Organization (WTO) to suspend patent protections for Covid vaccines, treatments and other therapies created by U.S. pharmaceutical innovators (through what’s known as the Agreement on Trade-Related Aspects of Intellectual Property, or “TRIPS”).

Don’t let the esoteric nature of the treaty fool you – this is an extremely dangerous proposal to attack U.S. patent rights.  As The Wall Street Journal observed, “this may be the single worst presidential economic decision” since the Nixon Administration.

That assessment is well-founded.  Strong patent protections provide the foundation for U.S. pharmaceutical innovation, and explain why the U.S. leads the world by accounting for an astounding two-thirds of all new drugs introduced worldwide.  The Covid vaccines and treatments at issue provide just the latest example.  Contravening that obvious causal relationship, however, some WTO members demand that the U.S. surrender those vital patent and other intellectual property (IP) protections for Covid vaccines, diagnostics and other treatments.  Worse, some misguided politicians here in America who should know better echo those potentially destructive demands.

That would tragically and needlessly undermine the very policies that prompted pharmaceutical innovators to devise and develop the vaccines already providing relief to the world, and leave us less capable of addressing current and future diseases and pandemics.  Ironically, President Biden himself has historically supported patent and other IP rights, including sponsorship of the 1980 Bayh-Dole Act that proved so invaluable in promoting innovation, and which The Economist magazine labeled “possibly the most inspired piece of legislation to be enacted in America over the past half-century.”

It’s also important to note that more rational actors like the European Union, United Kingdom, Canada, Switzerland and Japan oppose the proposed TRIPS patent suspension.   In contrast, WTO members India and South Africa, which back the effort targeting U.S. patent rights, have even joined international rogues China and Russia to create their own joint “vaccine center.”  That betrays the bad faith of their broader effort.

India and South Africa have joined with China and Russia (and Brazil) to establish a joint BRICS vaccine center.

The proposed TRIPS waiver targeting U.S. drug innovators and patent protections is also unnecessary, because treatments are already being provided to impoverished nations across the world, and patent rights are already being licensed at abnormally low prices or even free of charge.  To the extent that difficulties in immunizing impoverished populations remain, as emphasized by the Africa Centres for Disease Control, the problems center on local logistical distribution problems and vaccination hesitancy among the unvaccinated, not supply shortages.  Indeed, biopharmaceutical manufacturers already possess the ability to produce 20 billion vaccine doses in 2022.

More broadly, lawmakers and American consumers must consider the dangerous signal that suspending patent rights for pharmaceutical innovators would send, and the long-term disincentives that would follow if pharmaceutical patent rights were weakened rather than protected.  Pharmaceutical innovation demands billions of dollars in sunk costs of investment and testing, not to mention potential product liability lawsuits for any error.  To suddenly signal that those costs and risks won’t be sufficiently and fairly rewarded through ensuing patent protections would have catastrophic effects over both the short and long terms.  That will increasingly become the reality if we accept policies that deprive innovators and investors of the incentives to create drugs that save millions and even billions of lives.

American patent protections are the leading reason why we continue to produce the overwhelming share of new drugs worldwide, including the Covid vaccines themselves.  The WTO and Biden Administration must recognize and respect that reality, and Congress must act to stop this potentially catastrophic WTO proposal.

On August 5, CFIF teamed up with IPWatchdog, Inc. to offer a free webinar conversation to debunk several myths associated with patent thickets and pejorative terms used to denigrate innovators and patent owners.

Watch the full video of the event below.

As we’ve highlighted, the dangerous effort to weaken critical patent protections for U.S. pharmaceutical innovators often minimizes the role of private investment and exaggerates the role of public funding.  This offers a critical corrective at a moment when American drug and vaccine innovation is more important than ever:

The Critical Role of Private Pharmaceutical Investment

As we’ve continued to highlight, Joe Biden, Bernie Sanders and others dangerously seek to weaken U.S. patent protections, which for centuries have led the world and account for the fact that the U.S. pharmaceutical sector introduces more new drugs than the rest of the world combined.  Their logic is that federal research and development funding justifies confiscation, not realizing that, as former patent attorney Abraham Lincoln once noted, the U.S. patent system added “the fuel of interest to the fire of genius.”  From our friends at AEI, a new graphic highlights again how private R&D actually dwarfs federal funding, which understandably peaked in the 1960s during the Cold War and Space Race.  It’s simply no justification for weakening America’s ongoing legacy of strong patent protections:

Private R&D Leads the Way

Regrettably, the White House today announced an executive order that effectively imports drug price controls from foreign nations with socialized healthcare systems.  We at CFIF strongly oppose the order and encourage immediate reconsideration.  Below is CFIF President Jeffrey Mazzella’s statement:

“Price controls simply do not work, regardless of the product targeted or the location they’re attempted, and real-world experience establishes that pharmaceutical price controls are no different.  The new executive order would impose what’s known as an International Pricing Index (IPI) for U.S. drugs administered by the federal government, meaning that foreign governments’ drug price controls would suddenly control our own reimbursement rates.  That would upend our current system, which has actually already reduced the cost of the 50 most popular Medicare Part B drugs sold by approximately 1%.  Our current system already includes the discounts negotiated between hospitals, healthcare plans and payers.  In contrast, foreign governments whose price control schemes we would import don’t negotiate, but instead dictate prices while threatening to violate patent rights and employ a ‘take it or leave it’ approach.

“As a direct consequence of foreign nations’ price control approaches that disrespect patent rights, those nations receive far fewer new lifesaving and life-improving drugs than American consumers.  For example, 96% of all new cancer drugs over the past decade were made available to U.S. consumers.  In contrast, only 56% of those same drugs became available in Canada, only 50% became available in Japan and only 11% in Greece, as just three examples.  Simply put, consumers in nations whose governments impose drug price controls don’t enjoy access to nearly as many new drugs as Americans, or nearly as soon.  As The Wall Street Journal found, that’s why America outpaces European nations in terms of cancer survival rates, among other advantages.

“Even the Trump Administration itself has highlighted the destructive effect of importing foreign price controls.  In 2018, its Council of Economic Advisers affirmed that, “If the United States had adopted the centralized drug pricing policy in other developed nations twenty years ago, then the world may not have highly valuable treatments for diseases that required significant investment.”

“Currently, the United States accounts for nearly two-thirds of all new drugs introduced worldwide, and our more market-oriented system and protection of patent rights explains why.  Very few potential new drugs ever reach the market, due to astronomical research and development costs, lengthy government safety tests, laboratory effectiveness trials, possible product liability lawsuits, patent protection limitations and other bureaucratic hassles.  Imposing artificial price controls would add to those headwinds by making it less possible to recover the massive costs of developing new medicines and R&D, leading to fewer new drugs for U.S. consumers.

“Instead of importing foreign nations’ price control schemes and their consequences, America should be exporting our superior system to their shores.

“Today’s executive order contravenes the Trump Administration’s broader agenda of deregulation, free-market approaches and strong intellectual property (IP) protections.  Hopefully, the White House quickly realizes the potentially catastrophic consequences of this order, lest American consumers suffer in the same way as consumers in the foreign nations that impose the price controls that it now seeks to import.

“In his State of the Union Address earlier this year, President Trump reassured Americans that, ‘To those watching at home tonight, I want you to know that we will never let socialism destroy American healthcare.’  Unfortunately, the White House’s executive order announced today regarding drug prices would do precisely that.

“We therefore urge President Trump to reconsider this potentially catastrophic order in the strongest possible terms.”

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In the ongoing debate over healthcare reform, it’s important to keep our collective eye on the ball.  In that vein, as CFIF has repeatedly emphasized, we must ensure that free market principles prevail, and that includes protecting patent rights rather than weakening them.  Otherwise, American consumers will pay the price in fewer pharmaceutical innovations, shortages and worse health outcomes.

After all, as we’ve often pointed out, it’s not by accident that the United States accounts for an astonishing two-thirds of all new pharmaceuticals in the world.  That reflects the fact that we lead the world in intellectual property (IP) protections and avoid the destructive price controls that nations favoring socialized medicine impose.  As a consequence, patients in those countries don’t receive the new lifesaving and life-enhancing drugs that we do.

Unfortunately, there’s bad news to report in that regard, as Representative David Cicilline (D – Rhode Island) has introduced the misnamed “Affordable Prescriptions for Patients Through Promoting Competition Act.”  Most conspicuously, his proposal would begin prohibiting patent protections for pharmaceutical innovators developing improvements to their existing products.

Here’s why this is important.  Existing laws that have made us the most innovative nation in history allow for patent protection for new and useful improvements to existing pharmaceuticals.  Such improvements can help patients in such ways as eliminating side effects, reducing the necessary frequency or dosage, enhancing potency, boosting effectiveness or even addressing other illnesses beyond the drug’s original purpose.

But if innovators can no longer expect patent protections for the billions of dollars and years of hard work invested in developing them, then those innovations will begin to dry up.  Developing new or improved drugs typically requires over 10 years, and only approximately 10% of new discoveries actually make it to market after regulatory approval.  Accordingly, we must enhance the prospect that the fruits of innovators’ labors will be obtainable, not diminish them.

Representative Cicilline’s proposed bill is therefore a potentially catastrophic one for American consumers, who rely upon pharmaceutical innovators more and more to save lives and maintain health.  We therefore call upon all Members of Congress to oppose it.

In an excellent piece in today’s Wall Street Journal, Scott Atlas of Stanford University highlights how Americans enjoy far greater access to new lifesaving drugs than patients in Europe and elsewhere, and how the movement to impose government price controls would only restrict access to new drugs and degrade Americans’ health outcomes, as we at CFIF have been emphasizing:

America has superior treatment results for virtually all serious diseases reliant on drug treatment, including cancer, heart disease, stroke, high blood pressure and diabetes.  Price controls would jeopardize that advantage…

Pegging drug prices to those of foreign countries, as both Bernie Sanders and Donald Trump have proposed, would ultimately lead to the same consequences Europeans endure – reduced access to critical drugs and worse outcomes, including more deaths from disease.”

Mr. Atlas also notes how the Trump Administration has taken positive steps toward actually reducing drug prices, by targeting rebates received by pharmacy-benefit managers (PBMs) from drug manufacturers:

The Trump Administration has announced a proposal to do away with rebates paid by drug manufacturers to pharmacy-benefit managers, replacing them with discounts to beneficiaries at the point of sale.  PBMs are middlemen that control ‘formularies,’ the lists of drugs covered by a plan.  Rebates from drug companies to PBMs are payments for influence – either to position a drug on the formulary as ‘exclusive’ or to give it preferred status over competitors.

PBMs act counter to patient interest while aggravating the lack of price transparency.   These complex behind-the-scenes payments – $179 billion in 2016 – reward inflated list prices, on which patient premiums are often based.  This prevents patients from taking account of price…  Go-betweens like PBMs should be eliminated.”

Finally, and just as critically, Mr. Atlas adds that weakening patent and intellectual property (IP) rights would constitute a particularly destructive course:

Drugs are the most significant reason for the past half-century’s unprecedented gains against deadly disease.  But policies that aim to reduce drug prices – price regulation and weaker patent protection – are also associated with delayed availability, less innovation, and limited access.”

Mr. Atlas delves into statistics showing the enormous advantage that Americans enjoy in terms of new drugs and health outcomes, and his piece is well worth the full read.  Hopefully policymakers at all levels of government are listening.