This issue brief reviews the evidence on the impact of price controls on biopharmaceutical innovation and calibrates what this evidence implies for recent price control proposals in the US. A large academic literature estimates the effect of future drug revenues on R&D spending with a mid-range effect of a 1 percent reduction in revenue leading to a 1.5 percent reduction in R&D activity. Using the range of such effects found in the literature we find the proposed price controls of US bill HR3, the Lower Drug Costs Now Act, would lead to a 29 to 60 percent reduction in R&D from 2021 to 2039 which translates into 167 to 342 fewer new drug approvals during that period. The mid-range effect of the evidence implies a 44.6 percent decline in R&D and 254 fewer new drug approvals. We argue this is a conservatively low estimate of the impact of such proposals even though it is as much as a ten times larger reduction in new drugs compared to a recent CBO analysis.
Issue Brief: The Evidence Base on The Impact of Price Controls on Medical Innovation
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Interesting analysis! The potential impact on R&D is significant. It’s like nerfing innovation before it even starts. Makes you wonder if there are alternative funding models to explore. This impact on research and development, and new approvals is quite worrying. It reminds me of how important it is to be aware of the resources in games like Pokerogue and the implications to building a full Pokerogue Dex !