OPINION:
More than 4 in 5 Americans blame the pharmaceutical industry’s profits for the high prices of prescription drugs. It’s little wonder, then, that roughly the same share supports placing price controls on prescription drugs through Medicare.
The logic is straight out of Robin Hood. Our leaders should take from the “rich” drug companies and give to the “poor” patients.
This line of reasoning is at odds with what is happening in the pharmaceutical market. A new report from consulting firm IQVIA says drug companies have been spending a massive and growing portion of their revenue on inventing new medicines.
Given this reality, the most likely outcome of price controls won’t be to make drugs more affordable or improve access to the latest medicines. Instead, they will drain the drug industry of precious research and development dollars and undermine American competitiveness and medical innovation in the process.
Ten years ago, the nation’s largest drug firms devoted $86 billion to research and development, a sizable sum. Nine years later, in 2024, the industry’s annual research and development tab more than doubled to $190 billion.
That’s equivalent to one-fourth of their sales, and growing evidence shows that this surge of investment is paying off for patients.
Last year, the success rate for phase 3 clinical trials significantly increased. Sixty-five novel medicines were launched globally in 2024, an encouraging increase over the pre-pandemic norm.
These aren’t abstract experiments. They are cancer immunotherapies, Alzheimer’s drugs and rare disease treatments that offer hope to millions.
It’s not just large corporations driving medical innovation in the pharmaceutical sector. Of the more than 5,300 clinical trials that began last year, nearly one-third came from smaller firms, or “emerging biopharma companies,” as the report calls them. These startups were also behind 83% of the medicines launched in the United States in 2024.
Billions of dollars in investment by companies large and small, right here in the United States, is exactly the sort of thing our public policy should encourage. However, price controls such as those set to take effect in Medicare at the beginning of next year do just the opposite. They will siphon money away from research and development and redirect it to the federal Treasury.
It’s not as if the federal government will use that money to make drugs more affordable. Research indicates that Medicare will capture most of the savings the price controls yield and saddle millions of Medicare beneficiaries with higher out-of-pocket costs.
Such policies would be ill-advised under ideal circumstances, but at a moment when the United States faces fierce competition in drug development from China, these looming price controls could aid our chief economic rival.
There are already worrying signs. Of the clinical trials launched last year, 30% were initiated by Chinese companies, while the U.S. share was only slightly higher, at 35%.
History shows that price controls can neuter a healthy domestic pharmaceutical industry. In the 1970s, Europe led the world in pharmaceutical innovation. It fell from that position only after embracing price controls across the continent. These policy decisions cleared the way for America’s dominance of the sector.
Once lost, leadership in drug research is not easily regained. Where in the world will research and development take place if price controls have destroyed the incentives for investing in it here?
Washington must learn from Europe’s mistake before it becomes our own.
• Sally C. Pipes is president, CEO and Thomas W. Smith fellow in health care policy at the Pacific Research Institute. Her latest book is “The World’s Medicine Chest: How America Achieved Pharmaceutical Supremacy — and How to Keep It” (Encounter 2025). Follow her on X @sallypipes.
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