The proposal would gradually reduce Medicare’s reimbursement rate for advanced drugs administered in hospitals, clinics and doctor’s offices by 30 percent. Mr. Azar claims these price controls “will save $17 billion in Medicare drug spending over the next five years.”
It’s true that price controls would save the government money, at least initially. But they’d also deter investors from pouring money into risky, expensive — but potentially game-changing — biopharmaceutical research projects.
The cuts to research funding would make it much harder for scientists to discover the cures of tomorrow. Those future medicines wouldn’t just save lives — they’d also save the government money by stemming the rising tide of chronic disease. Mr. Azar’s price-control proposal is penny-wise and pound-foolish.
Drug research is ludicrously expensive and fraught with pitfalls. Most research projects fail in the lab. And roughly 9-in-10 experimental drugs that emerge from the lab and enter human trials fail to gain FDA approval. This high failure rate explains why it takes almost $3 billion to develop just one drug.
Unlike most European nations, which impose strict price controls on medicines, the United States has a relatively free market for drugs. The ability to earn a sizeable return on successful drugs explains why a majority of world’s new drugs are invented in America. America’s researchers are currently developing more than 3,000 new medicines.