First Things First

Price Controls Would Stifle Drug Innovation

Health care is one of the top issues for voters, and one part that concerns people is drug prices, which Congress is tackling.

There are many ways to reduce the price of drugs – some better than others.  One path we shouldn’t go down is having government use prices controls to hold down costs.

The Lower Drug Costs Now Act of 2019, a bill in the House of Representatives, does just that and would be disastrous for drug innovation.

The bill would allow the federal government to negotiate drug prices as long as the price isn’t 120% more than the average price in developed countries. If drug manufactures don’t negotiate, their products would be slapped with a tax up to 95% of sales.

Price controls don’t work. In a letter to the House of Representatives opposing the bill, the U.S. Chamber explained such prices controls are employed elsewhere in the world and hurt drug research and development:

Despite the remarkable scale of pharmaceutical research and investment in Europe during the 1980s, government price controls enacted there two decades ago have resulted in research moving elsewhere.  In 1986, investment in pharmaceutical research and development in Europe exceeded investment in the U.S. by about 24%. Today, investment in Europe trails the U.S. by nearly 40%.  This has resulted in 46 fewer new medicines introduced by European companies and a loss of over 1,500 research jobs.

The Congressional Budget Office (CBO) also weighed in, finding the bill would have a negative effect on pharmaceutical innovation if it became law.

“A reduction in revenues of $0.5 trillion to $1 trillion would lead to a reduction of approximately 8 to 15 new drugs coming to market over the next 10 years,” the CBO found.

America’s pharmaceutical industry has made amazing strides over the years. From fighting cancer to treating mental illness, drug innovation has led to the improved quality of life for millions of Americans.

Let’s not turn off the faucet of innovation. Attempting to lower drug costs using prices controls will have unintended, and possibly harmful, consequences. 

Diving In

Business and free enterprise have the ability to improve our environment, as noted in this Wall Street Journal book review of Andrew McAfee’s More from Less:

Conventional wisdom would have us believe that our insatiable needs and desires require more and more natural goods, inexorably stripping the planet of precious resources. But a funny thing happened on the way to catastrophe, Mr. McAfee explains: We started to innovate our way out of it. In particular, we began to “dematerialize”—make better stuff while consuming less total material. Americans are now consuming less total steel, aluminum, copper, fertilizer, water, timber and paper than in previous years, even as our GDP has continued to soar and our agricultural yield has increased dramatically. As a result, asserts Mr. McAfee, a research scientist at the MIT Sloan School of Management and co-author of “The Second Machine Age” (2014): “Resource scarcity isn’t something we need to worry about.”

…

For Mr. McAfee, the decoupling of economic growth from resource consumption highlights a more general idea: Growth, propelled by capitalism and technology, is good. Growth works, raising people and nations out of poverty, improving sanitation, increasing access to education, reducing infant mortality, and elevating standards of living. Growing economies are also good for the earth, Mr. McAfee contends, citing Indira Gandhi’s observation that “poverty is the biggest polluter.”

Have a business-related long read you want to share? Please email me.

The Big Picture

Congratulations to Strata-G, a Knoxville, TN, company that won the Dream Big Small Business of the Year Award, presented by MetLife, at the CO– Summit in Washington, D.C.

Found a chart you want to share? Please email me.

Looking Ahead

October 22, 2019: Join the Center for Capital Markets Competitiveness for the launch of the Project for Growth and Opportunity —Project GO. This effort will promote free and fair capitalism, sensible modernization of corporate governance, and educate stakeholders on the vital role public companies play in inspiring innovation, creating jobs and sparking economic opportunity for all Americans.

October 24, 2019: The U.S. Chamber of Commerce Foundation's national workforce conference, Talent Forward 2019, will convene education and workforce experts to discuss the future of talent and the future of work.

October 29, 2019: The Global Innovation Policy Center will host the 7th annual IP Champions Gala to showcase the role intellectual property plays in stimulating innovation and creativity.

To Play Us Out

I’m taking a break from the classic rock I usually share. Jimmy Eat World released a new album. Enjoy some 90s-style pop rock.

Have a song recommendation? Please email me.

Please forward this newsletter to a friend. And don’t forget to send me your tips and comments. Also, keep up with latest business policy issues by bookmarking Above the Fold and following @seanhackbarth and @uschamber on Twitter.