For drug companies, no life-saving deed goes unpunished
The local news often carries stories of someone – a police officer, a firefighter or sometimes just a regular citizen – who goes above and beyond the call of duty to save another person. That life-saver is praised as a hero. But if you’re a drug company that creates a new vaccine that saves hundreds of thousands of lives, Democrats will reward you with demonization and, worse yet, price controls.
At the beginning of 2020, several pharmaceutical manufacturers perceived COVID-19 could become a global pandemic. The companies didn’t wait for the government to give them a thumbs up or for Congress to approve funding.
They committed their expertise and resources (i.e., money they made selling other life-saving drugs) to finding a new vaccine. And they did, in record time. Instead of the 10 to 12 years it would normally take to create a new drug, several drug companies had invented a vaccine, tested it in clinical trials and were rolling out doses in less than a year. By the time Joe Biden took the oath of office in January 2021, some 1 million Americans were being vaccinated daily.
Today, more than 1 million Americans have died from COVID, according to the U.S. Centers for Disease Control and Prevention’s (CDC) COVID-19 tracker. It could have been many more. According to a CDC study published in July: “In this modeling study, COVID-19 vaccination was estimated to prevent 27 million SARS-CoV-2 infections, 1.6 million COVID-19–associated hospitalizations, and 235,000 COVID-19–associated deaths among vaccinated persons 18 years or older from December 1, 2020, to September 30, 2021.”
Regardless of the exact number of lives saved, the drug companies came to the rescue by creating vaccines and treatments (e.g., Paxlovid) in record time. And yet Democrats are denouncing them and imposing price controls on some of their products.
Here’s how Sen. Elizabeth Warren (D-Mass.) and several of her Democratic colleagues expressed their sentiments in a letter last march: “The large, across-the-board price increases of popular, brand name prescription drugs appear to be an example of pharmaceutical companies taking advantage of their abusive market power to expand already-large profits. And the coordinated and timely price increases ring of political opportunism.”
Actually, according to the Bureau of Labor Statistics, drug prices are up just 2.5 percent over the past year, considerably less than, well, just about everything else. But it is true that some of the newest drugs can be very expensive. There are reasons for that.
The U.S. pharmaceutical industry is one of the most research and development (R&D) intensive industries in the country. A few years ago, I calculated the average cost of creating a new, Food and Drug Administration (FDA)-approved drug. It was $1.6 billion.
In addition, the companies have been increasingly focusing on diseases that affect only a small number of people, referred to as “orphan drugs.” That means the R&D and production costs can be spread over only a few thousand patients, not millions, which increases the per-patient treatment cost. That’s not price gouging or “abusive market power,” as Warren asserts. It’s just math.
But the biggest sham in the Democrats new prescription drug bill is what they refer to as “negotiations” for drugs used by Medicare patients. If a drug company refuses to accept the government’s price, the government will take up to 95 percent of the targeted drug’s revenue. Not profits, mind you, but revenue from the drug’s sale.
How many potential drugs could be affected by the Democrats’ new policy? Several studies have weighed in with their estimates. The initial number of drugs affected will be small, but that number grows over time.
Defenders argue that the threat to innovation is small. But ask yourself how many companies will invest $1 billion-$2 billion to develop a new drug when there is no guarantee of final FDA approval. And if it is approved, government price controls are guaranteed.
The pharmaceutical industry recently explained, “With more than 8,000 medicines in development, 74% of which are potentially first-in-class, patients have more reasons to be optimistic than ever before.” Will patients still be as optimistic if Democrats pass their price controls?
How many of those 8,000 medicines won’t make the cut? Will it be new cancer drugs? A cure for Alzheimer’s? Parkinson’s? Arthritis? Or the companies’ ability to respond quickly to the next pandemic?
Remember, drug companies jumped into the COVID-19 fight with their own resources when Dr. Anthony Fauci was still ridiculing the idea of the public wearing masks.
We’ll never know what new drugs might have been developed but won’t be under the Democrats’ price controls. But if your doctor tells you a new drug that might have cured your debilitating or deadly disease has been scrapped because of cost concerns, be sure you remember that the next time you vote.
Merrill Matthews is a resident scholar with the Institute for Policy Innovation in Dallas, Texas. Follow him on Twitter @MerrillMatthews.