High Cost of Price Controls: Why Biotech Breakthroughs Are at Risk

Originally published on Substack. 

​Recently, Americans for Tax Reform released my new paper, Will Washington Hand the Future of Biotech to Beijing? I presented my work at the U.S. Capitol a couple of weeks ago. And let me tell you — this isn’t just another paper to gather dust. It’s about whether the next cure for Alzheimer’s or cancer is discovered in Boston or Beijing.

I had the honor of serving the American people as Associate Director for Economic Policy at the White House’s Office of Management and Budget in the first Trump administration. It was a crash course in how Washington really works — and often doesn’t. I learned a lot, from building budgets to cutting red tape, to the daily reminder that if you’re not shrinking government, government is expanding on autopilot.

And now, with biotech, we’re at that same crossroads. Either we let markets breathe, or we smother innovation with more government control.

​America Leads When Government Steps Back

Let’s not forget: America didn’t become the world’s biotech leader through central planning. We got here when Washington, at rare moments, actually loosened its grip.

Take the Bayh-Dole Act of 1980. Before that, federally funded discoveries just sat on the shelf, gathering dust. Not a single drug discovered with federal dollars ever made it to patients. Bayh-Dole didn’t create new cures — it just allowed researchers and entrepreneurs to do something with discoveries taxpayers had already paid for, finally.

Then there was the Hatch-Waxman Act in 1984, which made it easier for generics to enter the market without undermining incentives for brand-name innovators. Medicare Part D, introduced in 2003, helped reduce some drug prices below projections. Imagine that the government predicted one thing, markets delivered something better.

The lesson? Every time Washington steps back just a little, markets do what they’re supposed to: innovate, compete, and lower costs.

Washington’s Wrong Turn

However, Washington is heading in the wrong direction. President Biden’s Inflation Reduction Act hands bureaucrats sweeping authority to set drug prices. Currently, President Trump is on the verge of enforcing a Most Favored Nation executive order from May, which would tie U.S. prices to foreign government caps.

These are costly turns. The Council of Economic Advisers, during Trump’s first term, showed that Americans already shoulder nearly 70% of global patented drug profits, despite being just one-third of the global economy. That’s not because markets failed, but because other governments imposed price caps in different countries.

And now, instead of fixing that, we’re importing their bad ideas. Research at the National Bureau of Economic Research found that forcing prices down 40–50% would slash early-stage R&D by 30–60%. Think about that: cut prices in half, and you cut the pipeline of new drugs almost in half, too. It doesn’t make medicines cheaper. It makes them disappear.

Tariffs: The Latest Twist

And now for the breaking news: tariffs. Starting this week, Trump says he will put 100% section 232 tariffs on many branded drugs unless companies build plants in America.

Sounds tough. But tariffs are just another form of government control. They’re taxes — and taxes on medicine land on patients, either directly or through premiums. The American Hospital Association warned these tariffs could disrupt supply chains and put patients “at significant risk.” PhRMA said it bluntly: “Every dollar spent on tariffs is a dollar that cannot be invested in new treatments and cures.”

So, whether it’s price caps or tariffs, the theme is the same: Washington should be more American and free market, not more controlling like China, for us to win.

China Surges Ahead While We Stall

Meanwhile, Beijing is smiling. Its Made in China 2025 plan makes biotech a national priority.

• In 2009, China accounted for 1% of the global clinical trials. By 2024, it had 30%. The U.S.? We slipped from 39% to 35%. At this pace, China could pass us by 2027.
• On STEM talent, China produced 338,000 advanced degrees in 2020, compared to about 220,000 in the U.S. That’s not just an edge — that’s an avalanche.
• Their biotech market was valued at $74 billion in 2023, projected to reach $263 billion by 2030.

Now, here’s the kicker: China’s system is still inefficient. Central planning can produce patents, but it cannot make breakthroughs. They don’t have the freedom, the dynamism, the entrepreneurial spirit that America does. But if we keep kneecapping our innovators, they don’t have to be better — they just have to wait for us to trip over our own bad policies.

The Economics of Incentives

Here’s where the economics is crystal clear. Innovation requires incentives. Bringing a drug to market costs billions and takes a decade. Nine out of ten attempts fail. The only reason investors take that risk is the chance of a return. Cap the returns, raise the taxes, pile on the regulations, and the risk just isn’t worth it anymore.

Europe shows us what happens. Their price controls caused patients to wait years longer for new therapies, and many never received them at all. Their share of global R&D plummeted. America surged because we refused to follow that path.

The Cost of Getting This Wrong

If we continue this trend, by 2040, our biotech market could stagnate at around $2.4 trillion, rather than surging to $5.5 trillion. Novel drug approvals could fall from 55–60 a year to fewer than 30. And the venture capital that fuels innovation will migrate elsewhere.

This isn’t just dollars and cents. It’s patients waiting for treatments that never come. It’s families losing loved ones to diseases that could have been cured.

A Better Path Forward

The alternative is clear. Stop importing foreign failures. Reject MFN and IRA mandates. Protect intellectual property, don’t politicize it. Streamline FDA approvals, cut red tape, and let patients and doctors—not bureaucrats—make the decisions. And empower patients with real choice and real price signals through tools like no-limit Health Savings Accounts.

The solution to high costs and slow innovation isn’t more government—it’s less.

Closing – The Choice Before Us

So here’s the choice. America can double down on price controls, tariffs, and bureaucracy — and hand the future of biotech to Beijing. Or we can unleash competition, empower patients, and let people prosper.

As someone who worked on budgets and deregulation at the White House, I can tell you: government doesn’t innovate. People do. And if Washington steps back, America will remain the global leader in cures and innovation.