America doesn’t want to bear the burden of medical innovation anymore
Pharmaceutical innovation is an expensive process—one that Americans no longer seem comfortable shouldering on their own. That’s if you read between the lines of President Biden's latest plan.
On Aug. 29, the Biden administration listed ten prescription drugs that will be up for price negotiations under Medicare.
Eliquis, Enbrel, Entresto, Farxiga, Fiasp, Imbruvica, Januvia, Jardiance, Stelara, Xarelto—these medications treat everything from blood clots to diabetes and rare cancers.
For seniors, having adequate access to these drugs could mean life or death.
“Today is the start of a new deal for patients, where Big Pharma doesn’t just get a blank check at your expense and at the expense of the American people,” Biden said in a White House press conference.
“Big Pharma is charging Americans more than three times what they charge other countries simply because they could. I think it’s outrageous. That’s why these negotiations matter.”
Many countries around the world negotiate drug prices with pharmaceutical companies. But these countries aren’t responsible for the lion’s share of pharmaceutical research, drug patents, and industry profits.
America punches above its weight in every category of healthcare innovation, which comes at a hefty cost for taxpayers.
That could all change as early as 2026 under Biden's new plan.
American healthcare: By the numbers
Healthcare in America is a divisive topic.
On one hand, the United States spends twice as much per person on healthcare as other wealthy countries. Millions of Americans are uninsured. Many more go into debt because of medical emergencies and out-of-pocket expenses the government doesn’t cover.
But America is indispensable to the global healthcare economy because a huge share of the innovation and drug advances happen there.
Despite only accounting for 4% of the global population, the United States represents nearly half the world’s $8 trillion healthcare economy.
Between 64%-78% of worldwide pharmaceutical profits flow into U.S. companies, giving them a powerful incentive to continue driving healthcare innovation and drug research. Nearly 44% of drug patents are granted to U.S. pharmaceutical companies and researchers, according to the National Library of Medicine.
It’s not just the private sector doing the work.
Public sector investment by the National Institutes of Health (NIH), an agency of the U.S. Department of Health and Human Services, has contributed to hundreds of new drugs being approved in recent years.
Research by the Institute for New Economic Thinking found that tax dollars “funded every new pharmaceutical in the last decade,” referring to the period between 2010-2019. That’s 356 drugs and 219 biological targets.
According to the National Academy of Sciences, the federal government spent $100 billion to subsidize all 200+ drugs that were approved between 2010-2016.
The Foundation for Research on Equal Opportunity, a non-profit think tank, ranked the United States tops in the world for healthcare science and technology.
The U.S. excelled in medical advances, scientific discoveries, and health digitization.
How much longer can the U.S. subsidize global healthcare?
The U.S. gets a lot of flak for its privatized healthcare system. But it can’t change without massive repercussions for countries in its sphere of influence.
Americans have borne an incredibly high cost for scientific breakthroughs in health. Once these lifesaving treatments are developed and refined, other countries can use them at little or no extra cost.
Universal healthcare, price controls, drug negotiations—these are all bought and paid for by countries that aren’t spending untold billions on healthcare innovation.
As healthcare policy writer David Goldhill explains, “The United States can’t lower its costs by doing what other countries do, because what others do depends on our unique system remaining as is.”
Biden’s policy isn’t intended to undermine U.S. productivity in healthcare. But that could be an unintended consequence of government involvement in something as complex as prescription drug pricing.
The Pharmaceutical Research and Manufacturers of America, an industry group, has complained that the new policy will curb research and spending on certain drugs. The industry group said drugmakers already discount many of the drugs the administration put forward for price negotiations.
They, like others in the pharmaceutical industry, believe the policy gives the government power to arbitrarily set prices without accountability.
It’s not entirely clear how the price negotiations, which only apply under Medicare, would impact people’s spending.
While some patients could pay less at the pharmacy, the savings would accrue by limiting how much money Medicare recipients pay out-of-pocket for the year.
As the Biden administration seeks to elevate Medicare’s negotiating powers, pharmaceutical companies and trade groups are challenging the measures in court.
In June, the U.S. Chamber of Commerce filed a lawsuit arguing that the new pricing program is unconstitutional. Drugmaker Merck & Co. filed a similar suit.
Despite these challenges, Biden’s program is popular among voters. A new West Health-Gallup poll shows 83% of Americans favor Medicare drug price negotiations. A rare bipartisan agreement.