China’s biotech industry is only barely trailing — and in some areas, is already surpassing — America’s. China now initiates roughly the same number of clinical trials for novel drugs as the United States. Chinese biotechs are far outpacing their American competitors in the stock market.
Hong Kong’s biotech index climbed about 80% last year, compared to the U.S. index’s 20% gain. And drugs originating in China are poised to account for over a third of FDA approvals by 2040.
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Recently, a bipartisan commission concluded that U.S. policymakers only have three years to firmly reestablish America’s biotech leadership — or “risk ceding profound military, geopolitical, and economic advantages to China.”
FOR SLASHING PRESCRIPTION DRUG PRICES, TRUMPRX MARKS THE SPOT
But rather than heed this warning, some U.S. lawmakers support legislation that would further expand the Trump administration’s most favored nation policy for drugs, a move that would not only chill critical research and development investments in the U.S., key to driving medical advances to address U.S. patient needs, but also chill economic growth and further R&D and manufacturing investments in the U.S.
The impacts would be far reaching given that the U.S. leads the world in the introduction of new medicines and supports almost 5 million jobs across the U.S. Instead of making other countries pay their fair share, importing drug pricing policies from countries that limit and often deny access to new medicines will only serve to hand China and other economies the opportunity to overtake the U.S. in terms of biomedical R&D and manufacturing and the introduction of new medicines. It’d all but guarantee that China ultimately dominates the global biotech sector — and thus weaken U.S. economic growth and undermine our national security.
Biotech research is inherently expensive, risky, and time-consuming. Innovators and investors pursue these research projects because of the possibility of meaningful returns on investment for a successful product. In other words, they take major risks in pursuit of rewards sufficient to deliver a return on investment and fund additional R&D in the most scientifically promising but challenging areas.
If lawmakers peg U.S. prescription drug prices to the artificially low prices set by foreign governments, they’ll weaken the incentives to invest and innovate. Economists at the University of Chicago estimate that imposing these kinds of price controls in the U.S. could lead to a 48% reduction in R&D investments over a decade.
Government price controls would particularly hurt smaller biotechs and startups, which are responsible for more than half of new U.S. medicines. One study suggests that reduced revenue, and therefore reduced investment and partnerships, could cause a 90% reduction in drug development at small biotech firms. Overall, experts say that such price controls would prevent the development of 210 new drugs over the next 10 years.
If policymakers weaken incentives for innovation, the capital that supports U.S. biotechs could flow to other sectors or outside the U.S. entirely. One recent survey revealed that over 85% of life sciences venture capitalists believe that price controls would decrease investment in biotech companies.
This threat is not theoretical, and it’s not industry fearmongering. We’ve already seen government price controls hollow out European countries’ biopharmaceutical industries, not to mention patients in those countries often face lags of two years or more to access new medicines if access is approved — these are the possible impacts that U.S. patients could see if such schemes are implemented in the U.S.
Europe led the world in biopharmaceutical R&D in the 1970s and 1980s, when governments imposed ever more aggressive price controls. Since then, Europe’s global share of R&D investment and its contributions to the globe’s medical cabinet have precipitously declined.
It’s no exaggeration to say that America’s biotech industry, which supports millions of high-paying jobs and generates over $3.2 trillion in economic output, rose to prominence partly thanks to the mistakes of European leaders.
TRUMP IS RIGHT TO REBALANCE GLOBAL DRUG PRICES
China is working hard to unseat America as the world’s biotech leader. The country has spent years bolstering incentives and capacity for domestic innovation. Imposing crippling price controls would make China’s ascent much easier — and leave the U.S. dangerously dependent on our greatest adversary.
U.S. policymakers still have time to change course and avoid repeating Europe’s mistakes. Only then can the U.S. preserve the lead we’ve held for decades — and maintain our economic strength and national security.
Anne Pritchett is a senior associate at the Center for Strategic and International Studies and the founder of Pritchett Policy Associates.
