Just over a year ago, President Biden aimed to lead the nation towards innovation and collaboration, promoting research and unity to solve one of modern life’s biggest challenges—cancer.

The United States has a long history of innovation, driven by a patent system that protects inventors and encourages investment in research and development. But recent moves by the Biden Administration, including forcing “price negotiations” on ten drugs, have cast doubt on this innovation-friendly environment. Charles Sauer, President of The Market Institute has a new article in Real Clear Health looking at the incentives of healthcare innovation.

He writes:

“Just a year ago President Biden announced that his administration would begin the pursuit of eradicating cancer, but more recently he scrubbed that mission in pursuit of short-term political gain. On September 12th, 2022, President Biden announced his Cancer Moonshot. It was the 80th anniversary of President Kennedy declaring that we would go to the moon. As a sequel – the speech wasn’t as noble as President Kennedy’s – but the sentiment was a good one. It was President Biden’s goal to lead us in the direction of innovation and collaboration instead of division. The President wanted to promote innovation, promote research, unite the country behind a goal, and solve one of the biggest problems of modern life. To reach that goal the President needed innovation.

Fortunately for the President, the US has a long history of innovation. In fact, innovation is baked into the fabric of the country and has been one of the primary things that set us apart from the rest of the world. Our founders created a patent system that wasn’t based on cronyism, race, or sex. Our patent system gave the opportunity for any inventor to have the right to their invention, for a limited time. In exchange for that right, inventors would disclose their innovation and after their time-limited right to exlclude was over the innovation was free for use by anyone.

The patent system has driven our country forward, driven technology forward, and driven healthcare forward. Not only do inventors have the right to their invention, but companies and investors know that they can invest in inventions. This means that companies have an incentive to spend valuable resources on research and development, where without a patent system they might not. Without a patent system company “A” could do all of the work and company “B” could come in at the last moment and profit from the innovation. There would be no incentive to innovate, and innovation would likely slow to a trickle as companies started spending less on innovation and more on other aspects of their business.

Incentives are simple. Incentives drive people, organizations, and economies.

However, the Biden Administration recently released a list of 10 drugs that they would force into what they are calling “price negotiations”. The problem is that you can’t negotiate with the government, the government has all of the power. In this case they not only have all of the power, but if the pharmaceutical company fails to go along with the “negotiation” then the government will assess an onerous tax on these companies. And, out of the 10 drugs his priorities became clear, the President doesn’t actually support his cancer moonshot. The President supports price controls in a bid to buy votes instead of solving actual problems.

The problem isn’t actually with the drugs on his list at all. Yes, the list is tragic, yes, it is unprecedented, and yes it is appalling. But, these drugs are already out on the market, so price setting them (what “negotiated prices” should be called) likely won’t have a dramatic effect on supply. The idea that this list conveys is that the incentive to innovate in these areas; heart problems, diabetes, and cancer; is over.

Again, incentives are simple. Where incentives exist companies will follow. But, when those incentives go away why would a company risk their valuable resources pursuing the next big thing if the government has already proven that they can come in and take it. And, in reality the problem is even bigger than in these sectors. What if Elon Musk develops a new health clinic in space that is 100x better than anything on earth? Would the government mandate lower prices? President Biden’s list is an admittance that not only could they limit the prices, but they would.”

Read more at Real Clear Health by clicking here.

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