Bill filed by Neal would devastate life sciences
Legislation would vastly expand price controls on drugs
THE BIOTECHNOLOGY and pharmaceutical sector in the Boston area is about to hit some rough water. According to the Brussels-based consulting firm Vital Transformation, the prescription drug price controls in the Inflation Reduction Act (IRA) will result in job losses of at least 500,000 nationwide over the next decade, about 30,000 of which will come in Massachusetts.
The revenue losses from these price controls will harm Greater Boston’s entire life sciences ecosystem. When revenues are reduced for biopharmaceutical companies, one of the easiest ways for companies to cut costs is to reduce R&D spending, which encompasses 28 percent of industry budgets. That matters to Massachusetts, because the state economy is particularly dependent upon biopharmaceutical R&D.
Vital Transformation estimates that over the coming decade the IRA will reduce the number of FDA approvals by 40 percent. That means fewer drugs in the R&D pipeline. Not only layoffs of clinical researchers, but also fewer clinical trials at Massachusetts hospitals and fewer royalty agreements for academic research. The adverse impacts will hit the private, nonprofit, and public sectors.
One would think that the Massachusetts congressional delegation would be scrambling to reverse legislative changes that are likely to drive job losses in the state. In fact, the opposite is the case. Some members of the congressional delegation are doubling down on policies that would lead to layoffs for Massachusetts residents.
Neal’s bill would do that in the extreme. It expands the number of drugs subject to price controls in Medicare and, most damagingly, extends government price controls to drug purchases by private health insurance plans. His bill would have the federal government massively interfere in the private sector, setting prices for the drugs in the private health insurance plans that cover 164 million Americans.
His bill would devastate the life sciences sector in Massachusetts and stifle innovative cures and therapies.
But why does Neal limit his legislation to prescription drugs? Why not set the prices that oil companies can charge to gas stations? Why not limit the prices that beef producers can charge to supermarkets? Why not have the government set the prices for all essential commodities? Under Neal’s logic, why shouldn’t a member of the Iowa congressional delegation author a bill to have the government fix lower prices for corn?
Any freshman economics major can tell you why this is a bad idea. When the government sets prices, you get shortages. Set the prices for gasoline or beef, and there will be no gas at the pump and no meat in the market. Fix corn prices lower, and farmers will plant soybeans. There is a reason the shelves are empty in Cuba and Venezuela — bad government economic policy.
And, as sure as night follows day, the expanded price controls in Neal’s bill will cause shortages of new and cutting-edge drugs, as the Vital Transformation report points out.This will, in turn, cause the cranes that are building lab space in Cambridge to go away. The companies that sell beakers and lab equipment to biotech companies will begin layoffs. The sandwich shop next to the shuttered biotech lab will go under.
This bill is a serious threat to the Massachusetts economy and should die a quick death.