Drug innovation is getting more valuable. We can't afford to undermine it.

By Tomas J. Philipson

Lawmakers in both parties are increasingly embracing the idea of price controls on medicines -- and in doing so, they're making a losing bet.

Price controls involve a fundamental tradeoff: lower prices today in exchange for less innovation tomorrow. Proponents are wagering that savings on existing medicines will outweigh the lost benefits of treatments never developed.

But the opposite is true. That's because modern innovation is increasingly aimed at treating disease earlier -- driving compounding human and economic benefits over time.

As drug innovation advances toward earlier intervention and better long-term outcomes, the societal costs of undermining it through price controls will only grow.

Developing a new medicine is expensive and risky. On average, it takes over a decade and costs more than $2 billion. For every new drug that launches, nine candidates fail.

Companies and investors cannot take those risks without confidence that if a drug succeeds, they will be able to earn the return that enables them to pursue new innovations. The United States has long been the world's drug development powerhouse because of its commitment to market-based pricing and strong patent rights, which provide investors the assurance they need.

But by curtailing expected returns, price controls would undermine these core incentives -- discouraging companies from investing in valuable, high-risk research. And as drug research increasingly focuses on treating earlier stages of disease, the potential costs of undermining that innovation are only growing.

That's because addressing disease at earlier stages can help forestall productivity losses and costly health complications.

Research I conducted with colleagues at the University of Chicago found that from 2000 to 2024, nearly 60% of improvements made to existing cancer medicines focused on treating the disease earlier in its course.

Consider Keytruda, an immunotherapy that began as a treatment for advanced melanoma. Over time, follow-on R&D added over 40 indications across numerous cancers -- including early-stage applications that allow treatment to begin before cancer worsens.

Imfinzi followed a similar trajectory: originally approved to treat advanced bladder cancer, the immunotherapy now helps patients with certain types of early-stage lung and stomach cancers.

These early interventions lessen strain on the health care system. One study of early-stage immunotherapy found that it decreased the risk of complications and cancer recurrence, reducing the likelihood that patients would need costly procedures and hospitalizations later.

Addressing disease before it debilitates patients may also bolster economic productivity. Research has estimated that drug innovation increases productivity by 4.8 million workdays per year and $221 billion in annual wages.

Price controls would cut off these downstream benefits at their source. Capping companies' returns would undermine the continued research needed to improve them, develop new drugs, and generate benefits that ripple across society.

If policymakers impose drug price controls in pursuit of short-term savings, they risk sacrificing even greater long-term benefits. Medical innovation increasingly creates value not merely by treating disease, but by treating it before it becomes more severe and costly to manage.

Medical breakthroughs are proof that the most valuable innovations still lie ahead -- if we preserve the incentives to develop them.

Tomas J. Philipson is an economist at the University of Chicago and served as a member and acting chairman of the White House's Council of Economic Advisers from 2017 to 2020.

Editor’s Note: This is an opinion piece. The views expressed are those of the author and do not necessarily reflect those of this publication.