American corporations have saved so many lives and produced seemingly miraculous drugs that it’s easy to take the creation of future drugs for granted. Blame the President and Democrats in Congress for imposing price controls on pharmaceutical companies.
The development of new drugs does not happen suddenly. It requires highly trained scientists and years of research. It also requires huge funds. Estimates depend on how much it costs to create a new drug. One study from the Tufts Center for the Study of Drug Development The cost was estimated at about $3 billion, after including the investor’s opportunity cost.Another study found that the median cost of developing a new cancer drug is Less than $760 million.
That’s an extraordinary amount of money. And the reality is that many drugs never hit the market. They either don’t work or they can’t overcome safety concerns. The reason pharmaceutical companies and their investors spend so much money on research and development is that they believe it will return a healthy return later. If investors don’t believe they can make a profit on their investment in new drugs, the number of new treatments available will drop dramatically.
It’s capitalism in action. People invest their money now to earn more money in the future. Patients benefit from new drugs.
But pharmaceutical companies — the evil Big Pharma — are easy to demagogue. Americans like low prices. Progressives have a deep distrust of the free market. When these two factors converge, they often lead to destructive government intervention.
Consider inflation-cutting laws that allow governments to “negotiate” the price of some drugs and force drug companies to be penalized if prices rise too quickly in the eyes of regulators. prize. These are de facto price controls and are already having negative effects.
The Wall Street Journal recently revealed that Alnylam has announced a pause in the development of a cure for a rare eye disease. In a statement, it said it needed to consider “the impact of the anti-inflation law.” Eli Lilly said it would stop developing new cancer drugs because it “couldn’t meet the standards for continued investment” in response to the Democratic bill.
Pharmaceutical companies were already facing generic competition. But the law gave them a period of exclusivity so that they could make enough profit to justify their initial spending. Price controls erode that protection.
Americans have long benefited from pharmaceutical innovation. What a shame that millions of future Americans are unlikely to have the same opportunity.
