The Biden administration Medicare enforcer, the Centers for Medicare & Medicaid Services, recently named the ten drugs which would be subject to the first wave of Medicare price controls starting on January 1, 2026. Presumably tongue in cheek, they called this process negotiation. Imitating proven Mafia tactics, the consequences liken it to an offer the drug company can’t refuse.

Given the far-reaching implications of pharmaceutical price controls, it drew surprisingly little attention in the press, other than the Wall Street Journal (which is not nothing). Perhaps if the headline had read “cure for cancer indefinitely postponed,” it would have attracted more notice. It would also have the virtue of being more accurate than claims that this will be a major money-saver for Medicare beneficiaries. 

Price controls have a long and storied history of not working. Perhaps the best example in living memory was the price cap that, in the 1970s, President Carter placed on gasoline. Its true the price didn’t go up, but the consequences included long lines at filling stations and great glee of bureaucrats who could now promulgate new control mechanisms like odd and even license plate numbers.

When Reagan was elected the first thing he did was eliminate gasoline price controls. The shortages disappeared overnight. The disruption of the gasoline market was undoubtedly an inconvenience for most Americans. The negative incentives of price controls for the drug industry will have life or death consequences and not in merely a theoretical sense.

It’s true we would save money not paying for the drug that was never invented. The cost would be continuing to suffer, or die, from diseases that, unlike, say, HIV or Hepatitis C, have never been pharmaceutically addressed. It is axiomatic that whenever there is a pharmaceutical treatment for any condition it is cheaper than the alternatives: surgery, hospitalization, long-term care, etc. And inarguably less painful.

Even the Biden administration recognizes fewer drugs would be developed under its Medicare price fixing legislation. It estimates that the number of missing therapies at about a dozen over the next 10 years. Less tendentious analysts have estimated a number closer to 135. If any of these 135 missing drugs would have been a breakthrough in the treatment of, say, Alzheimer’s, Parkinson’s, or various as-yet-untreatable cancers, it would be a catastrophe. 

It’s ironic that a country that prides itself on cutting-edge science, like artificial intelligence, is pushing a price control scheme that will cut research and development investment in its most advanced industry by $663 billion over the next 15 years. These numbers are as reported in the Journal. It’s proof once again that artificial intelligence is no match for natural stupidity.

In addition to the absence of many new drugs there will also be a chilling effect on discovering new indications for existing drugs — something like 65 percent of all cancer drugs are, after initial approval, approved for other types of cancer. Keytruda, say, initially approved for lung cancer, was later approved for melanoma, famously helping President Carter with his melanoma brain metastasis.

Each subsequent indication requires the time and money to do additional clinical trials to prove efficacy. It is certain that fewer of these clinical initiatives will be undertaken in the face of looming CMS price cliffs. All privately-developed drugs are undertaken to earn a return on investment. If the return is reduced by premature price controls so will the number of drug discoveries. This is not theory or political bias; this is arithmetic. 

One argument frequently cited in favor of government price fixing is that this is the way it’s done in Europe and drugs are cheaper there. This is true. What it neglects is that America has been the engine of drug discoveries, not Europe. In recent times, the US has been responsible for some 60 percent of new drug patents versus some 35 percent for Europe. 

If we had to rely on Europe we wouldn’t have drugs like Keytruda, which has revolutionized treatment of some cancers; Humira, which makes life bearable for many rheumatoid arthritis sufferers; Nurtec which allows migraine sufferers to return to work in hours; or Trikafta, which has revolutionized the treatment of cystic fibrosis. 

A reasonable proxy for the relative health of drug discovery is the number of patents filed for new molecular entities. According to a study by the left-leaning PubMed Central, America was responsible for “more than half of the drug patent inventorship, European nations account for one third…” The study does not attempt to rank countries by the importance of their discoveries but the examples we cited earlier suggest the United States would be even more dominant. And to think we omitted the example of the mRNA Covid vaccine. 

Even the Biden administration admits there will be fewer new drugs; it just substantially underestimates the number. For a minor and misleading political talking point, President Biden has kneecapped one of America’s greatest industries — citing Europe as the model. At the Constitutional Convention in 1787 the delegates went to great lengths not to emulate the European models. This is a lesson of history the current administration would do well to relearn.