Price Controls Harm U.S. Drug Innovation, Entrepreneurial Risk-Taking and America’s Health

By SBE Council at 29 August, 2023, 10:22 am

NEWS

FOR IMMEDIATE RELEASE

Washington, D.C. – In response to the Biden Administration’s release of drugs targeted for government price controls via the Inflation Reduction Act and Medicare “negotiation,” the Small Business & Entrepreneurship Council (SBE Council) issued the following statement:

“In economics circles, no real disagreement exists on the impact of price controls on drugs. Namely, there will be reduced incentives and resources available for entrepreneurs and companies to develop new drug treatments for illnesses and diseases – a process, by the way, that faces great uncertainty and risk. Make no mistake, there will be fewer life-saving treatments for cancer and other diseases, as entrepreneurs, businesses and investors understand that government effectively setting price controls means government limiting potential returns. The only real disagreement is the degree or depth of these negative consequences,” said SBE Council chief economist Raymond J. Keating.

SBE Council president & CEO Karen Kerrigan added:

“U.S. policy has now ventured down a very harmful path that will have costly and unintended consequences for many years to come, if not reversed. Fewer innovators and innovative drugs mean inflated costs, limited treatments and options for patients, and the loss of U.S. leadership in this critical area. The outcome of President Biden’s price control policies will further impair our healthcare system and U.S. competitiveness. Consumers will be harmed not only at home but across the globe, as the world greatly benefits from America’s innovative bio-pharmaceutical output.”

Keating noted, “The leadership role by U.S. firms in developing new and improved treatments for patients has rested in large part on the absence of price controls. That’s now changing with the passage of the Inflation Reduction Act, and now the government selecting the first 10 drugs for price controls.”

Keating added, “Keep in mind that much of the vitality in the pharmaceutical industry comes from smaller, entrepreneurial firms. For example, according to the latest Census Bureau data (2020), 62 percent of employer firms in the pharmaceutical and medicine manufacturing sector of our economy have fewer than 20 employees, and 80 percent fewer than 100 employees. A key exit strategy for investors is via M&A, which incidentally also is coming under attack by the Biden administration. Unfortunately, a surefire way to diminish investment in these vital enterprises is for government to start down the path of imposing price controls, which is exactly what’s happening now.”

Related Content and Resources:

New Studies: The Dangerous, High Costs of “Inflation Reduction Act” Price Controls, Small Business Insider.

The Inflation Reduction Act is Deflating America’s Small Biotech Companies, Karen Kerrigan, Townhall.

New Drug Pricing Legislation Would Kill Small Biotech Firms, Karen Kerrigan, Townhall.

Harmful Effects of CMS Guidance on Small Biotechs, Opportunity to Be Heard Restricted, Comments to CMS.

CONTACT: 

Karen Kerrigan, kkerrigan@sbecouncil.org

Raymond Keating, rkeating@sbecouncil.org

SBE Council is a nonpartisan advocacy, research and education organization dedicated to protecting small business and promoting entrepreneurship. For nearly 30 years, SBE Council has worked on and advanced a range of private sector and public policy initiatives to strengthen the ecosystem for strong startup activity and small business growth.

Visit www.sbecouncil.org for additional information. Twitter: @SBECouncil

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