Never in the history of the modern world has there been such a need for the pharmaceutical industry to save our world and return us to a form of normality. Covid-19 is impacting everyone, including the leader of the free world. Yet before becoming ill himself, in a last-minute bid to curry favor with senior voters, President Trump signed executive orders aimed directly at this industry and its ability to perform.
One in particular would tie Medicare reimbursements to much-lower foreign drug prices. But the long-term impact would devastate American workers and patients.
Most developed countries impose strict price controls on medicines. The U.S. is one of the few exceptions. As a result, prices are higher here than they are abroad, but drugs are available that are not in other countries. Trump's order seeks to close this price gap by prohibiting Medicare reimbursements from exceeding the lowest price available in any nation with a "comparable per-capita GDP."
This overhaul would reduce drug prices -- at least for a time -- but the tradeoff is not worth it. There would be disastrous effects on our biotech industry and the millions of jobs it provides.
Developing new drugs is expensive and risky. After accounting for the nearly 90 percent failure rate in clinical trials, pharmaceutical manufacturers spend $2.6 billion and over 10 years to bring a treatment from the lab to pharmacy shelves.
Government price controls make drug development untenable. They limit the amount manufacturers can recoup from the few products that reach the public. That discourages investments in future pharmaceutical ventures.
Trump knows this but evidently doesn't care. His White House Council of Economic Advisers warned last year that price control legislation, which included price caps similar to the executive order, could prevent the creation of 100 medicines over the coming decade.
Losing out on a future cure for Alzheimer's, cancer, or Covid-19 would be devastating. But that's not the only reason to oppose the president's executive order.
The measure would cause massive job losses.
Covid-19 has devastated our economy. Over 57 million Americans have filed for unemployment since the pandemic began.
The president's order would compound these economic woes. The biopharmaceutical industry directly employs over 800,000 people in the United States and supports 4.7 million jobs nationwide.
Many of those are good union jobs. In my home state of Pennsylvania, union laborers earned $45 million installing or maintaining biotech research and manufacturing facilities from 2012 to 2017. Over the same time, union tradesmen and women earned at least $450 million working on similar projects nationwide.
Once firms start bleeding revenue as a result of government price-setting, they'll have no choice but to scrap expansion plans and curtail spending on new research projects and facilities. In the midst of the Great Recession, the biopharmaceutical industry shed some 80,000 jobs.
I've spent my entire career -- including eight years in the House of Representatives -- fighting to improve the lives of working Americans. I know how crippling the president's order would be for the small towns and communities that make up the backbone of our nation.
Tackling foreign countries' unfair price setting ought to be a priority no matter who wins the November election.
But we're in the midst of a public health and economic crisis. There has never been a more inopportune time to import foreign price controls.
They'd harm American patients and workers for years to come.
Ron Klink is a former Democratic congressman from Pennsylvania and is currently senior policy adviser at Nelson Mullins Riley & Scarborough LLP.