Editor’s note: Kenneth E. Thorpe is a professor of health policy at Emory University and chairman of the Partnership to Fight Chronic Disease. He served as deputy assistant secretary for health policy in the HHS from 1993 to 1995.
President Joe Biden has released his budget. In it, he put forward the outline of a plan he says will keep Medicare solvent for decades to come. Though details are sparse, we know the plan would double the scope of Medicare's new drug price controls — which haven't even come into force yet — to fund other priorities.
Medicare's finances need shoring up, to be sure. But doubling down on the misguided price-control policies included in last year's Inflation Reduction Act is not the way to do it. For starters, more price-setting could hamper a healthcare initiative close to Biden's heart: the "Cancer Moonshot," which aims to halve cancer death rates over the next 25 years.
Virtually everyone has experience dealing with cancer, whether personally or with a loved one, including Biden. But few recognize the monumental lift required to develop effective treatments, fully appreciate the tremendous progress we've already made, or understand the potential of cutting-edge innovations to change the game in the near future.
Precision is a necessity for any health-related decision. Unfortunately, the policies in Biden's budget are nothing if not imprecise, and promise to wreak havoc throughout the entire healthcare system.
Collateral damage from price controls will almost certainly extend to cutting-edge cell and gene therapies aimed at addressing the root causes of deadly diseases. Future public health successes — like those we've witnessed for COVID-19 and hepatitis C — would be all but impossible under the president's proposals.
Venture capitalists and other investors understand that drug development is an inherently risky process. Most efforts to bring a new drug to market end in failure. But many investors still choose to invest, for one important reason: the rewards for just a few successful drugs can outweigh thousands of expensive failures.
Potential funders routinely have to choose between multiple multimillion-dollar investment opportunities, each with a certain chance of making money and an often-larger risk of losing everything. When or how do funders determine whether to invest or walk away? There's no easy answer. It's a delicate balance that varies across industries.
So, if we truly want to address chronic disease burdens, the last thing we should do is give investors more reasons to think that investments in biopharmaceutical R&D won't pay off. There are enough market distortions in the drug industry as it is. Just take antibiotics; because of misaligned incentives in the antibiotic market, the pipeline for new antibiotics is nowhere close to what we need.
Price controls introduce an entirely new set of market distortions, by dramatically reducing the reward for successful drug development efforts. Price-setting does nothing to reduce the riskiness of biopharmaceutical R&D; it only adds to it.
So it isn't a shock pharmaceutical companies are already warning in SEC filings and investor calls that they are reassessing their investments in light of the price-control policies already put into law by the Inflation Reduction Act. Venture investors are making similar announcements. Private funds available for lifesaving "moonshot" R&D are evaporating by the day.
The Cancer Moonshot throws a few bones to research, for example $1.8 billion in public funding. But that's a tiny fraction of the estimated $18 billion of total cancer-related R&D potentially lost due to the Inflation Reduction Act's price-control measures. Another example is doubling the R&D tax credits for small businesses — once again, a Band-Aid trying to stop arterial bleeding.
Reducing the burden of cancer and other diseases borne by taxpayers over the long run is the best way to ensure Medicare's solvency. Better prevention and more advanced therapies can do just that.
Even initially high prescription drug costs aren't permanent. Prices drop quickly as patents and other exclusivity protections expire and generics competitors enter the market. About 90% of prescriptions dispensed in the United States today are generics — a higher generic penetration rate than any other nation.
There's no way around it — achieving the Cancer Moonshot's ambitious goals will require more innovation and investment. Safeguarding both the Cancer Moonshot and Medicare solvency will mean unleashing the ingenuity of America's R&D infrastructure. It's the same infrastructure to thank for a 27% reduction in cancer deaths between 2001 and 2020. Chipping away at the incentives for future drug development is a great disservice to the millions of Americans living with cancer and other chronic conditions.
The Biden Administration should be focused on bolstering the struggling health care workforce and removing barriers that stifle medical advances. Instead, it's tying the hands of innovators and investors, putting millions of patients at risk in the process.