EDITORIAL: Price controls are bad medicine

American companies have produced so many lifesaving and seemingly miraculous drugs that it’s easy to take for granted the creation of future drugs. Unfortunately, that mindset is likely to reduce the number of new wonder treatments coming to market. Blame the president and congressional Democrats for imposing price controls on drug companies.

Developing new drugs doesn’t just happen. It takes highly trained scientists and years of research. It also requires massive amounts of money. Estimates vary on how much it costs to create a new drug. One study from the Tufts Center for the Study of Drug Development pegged the cost at around $3 billion, after including the investors’ opportunity costs. Another study said the median development cost of new cancer drugs was under $760 million.

Either way, that’s an extraordinary amount of money. Then, there’s the reality that many drugs never reach the market. They either don’t work or fail to overcome safety concerns. The reason pharmaceutical companies and their investors spend this much on research and development is that they believe they can return a healthy profit later on. If investors don’t believe they can make money investing in new drugs, there will be a dramatic reduction in the number of new treatments available.

It’s capitalism in action. People invest their money now to earn more money in the future. Patients benefit from new medications.

But pharmaceutical companies — evil Big Pharma — are easy to demagogue. Americans like lower prices. Progressives have a deep distrust of the free market. When these two factors converge, it often leads to destructive government meddling.

Consider the Inflation Reduction Act, which allows the government to “negotiate” prices for some drugs and forces pharmaceutical companies to pay penalties if drug prices rise too fast in the eyes of regulators. These are de facto price controls, and they are already having a negative effect.

The Wall Street Journal revealed recently that Alnylam announced that it has paused development of a treatment for a rare eye disease. In a statement, it said it needed to examine the “impact of the Inflation Reduction Act.” Eli Lilly said it’s stopping work on a new cancer drug in response to the Democratic bill because it “no longer met our threshold for continued investment.”

Drug companies already faced competition from generic drugs. But the law gave them a period of exclusivity to ensure they could earn enough of a profit to justify the initial outlays. That compromise has been in place for almost 40 years. Price controls erode that protection.

Americans have long benefited from drug innovation. What a shame that millions of future Americans are unlikely to have the same opportunity.