The Goldwater Institute is a leading free-market public policy research and litigation organization that is dedicated to empowering all Americans to live freer, happier lives. We accomplish real results for liberty by working in state courts, legislatures, and communities nationwide to advance, defend, and strengthen the freedom guaranteed by the constitutions of the United States and the fifty states.
The following column is by Goldwater President and CEO Victor Riches.
When Congress passed the Inflation Reduction Act (IRA) in 2022, it promised to lower healthcare costs, particularly for Medicare beneficiaries. Central to this effort were two key provisions: Medicare’s Drug Price Negotiation Program and new price caps on selected drugs. That promise, however, may carry unintended costs for patients. Multiple studies since the law’s passage have suggested that those relying on the development of gene therapies or repurposed drugs could face reduced pharmaceutical innovation as a result of the heavy hand of government price setting.
The IRA’s Drug Price Negotiation Program will likely trigger two troubling trends, the first being reduced investment in the development of new drugs, including in cutting-edge areas such as gene therapy. Second, it will weaken incentives to finance research into the repurposing of existing drugs, which has historically yielded efficient, cost-effective breakthroughs—precisely because much of the underlying pharmacological data is already established.
Why? The answer is straightforward, though politically inconvenient. Supporters of the IRA assume that pharmaceutical companies will simply absorb the costs without altering their operations. However, several studies have demonstrated that diminished revenue for pharmaceutical manufacturers tends to reduce investment in research and development, resulting in fewer approvals for new drugs and leaving patients waiting for treatments that would improve their lives. One analysis found that for every 1 percent decrease in revenue, there is a 1.5 percent decrease in R&D. Based on a projected 12 percent reduction in manufacturer revenue through 2039, independent analysis from the University of Chicago estimates that up to 135 fewer drugs could be approved over that same period.
The implications are particularly concerning for patients with rare diseases. The IRA, as implemented, could slow progress during a time when groundbreaking, novel gene therapies are coming to market at an increasingly rapid pace. That’s what happened when Europe and other countries in the Organization for Economic Co-operation and Development adopted broad price control measures over a decade ago. The center of gravity for biomedical innovation began to shift dramatically toward the United States, leaving millions of patients under those regimes behind.
The data is clear. Of 460 medicines launched globally since 2011, Americans had access to over 85%. In contrast, fewer than half were available in OECD countries. Access is even more constrained within the first year of a drug’s approval: Only 5% of new drugs reached South Korea, 24% reached Sweden, and 36% reached Denmark during that critical window. Between 2017 and 2021, the launch rate of new medicines declined across several G20 countries, from 41% to 33% in South Korea, 50% to 45% in Canada, and 66% to 61% in Germany. This decline is not a model to imitate—it is a cautionary tale.
It was also entirely predictable. Investment, infrastructure, and intellectual capital follow incentives. If the U.S. government adopts a similar model of bureaucratic overreach in the form of price setting, it risks displacing the very ecosystem that enabled American leadership in drug discovery. Biopharmaceutical investors and early-stage developers may begin to see the U.S. as less attractive for high-risk, capital-intensive innovation—shifting jobs, venture formation, and clinical research elsewhere.
Moreover, global comparisons frequently cited to justify U.S. drug pricing obscure more than they clarify. For example, while list prices are typically higher in America, so is access. Other countries use centralized health authorities to determine what a medicine is worth and whether it will be reimbursed, if at all. The effects of such systems are visible in real-world access to cures. Americans benefit from faster and broader availability of new therapies than patients in nations with tightly controlled or socialized health systems.
Even when medicines are technically approved abroad, patients face formidable barriers. Reimbursement may be restricted to specific uses, rationed by health technology assessments, or delayed by opaque government negotiations. These processes deprive patients not only of choice, but also of the most precious resource for those living with chronic or life-threatening illnesses: time.
In reality, the greatest costs of the IRA will be borne by patients still waiting for a cure. They deserve access to new treatments—and that decision should be left to doctors and patients, not to foreign-style bureaucracies or elected officials calculating “savings” for short-term political gains. Health policy, at its best, fosters innovation and access. Trusting the market to reward medical breakthroughs is how we ensure tomorrow’s therapies reach the people who need them most.