ROI NJ: Price Controls Will Limit the Next Generation of Cures for N.J. Patients

By Jeanette Hoffman, Patients Come First New Jersey’s Executive Director

Lowering the cost of prescription drugs and healthcare treatments is a worthy goal — one all Americans can support. However, it’s critical that any cost-saving initiative does not jeopardize life-saving cures and access to treatments. Unfortunately, government price controls, including those implemented in the Inflation Reduction Act and the most-favored-nations executive order, could have those exact consequences.

The biopharmaceutical industry is one of the most research-intensive sectors in the world, with many of these life science companies headquartered in New Jersey. Developing a new drug typically takes 10 to 15 years and billions of dollars, with a high failure rate. Only a small percentage of drug candidates ever make it from the lab to the doctor’s office to pharmacy shelves. These massive investments are only feasible when companies can recoup costs and earn returns through pricing models that reflect both the costs and risks of innovation.

However, when drug prices are artificially capped or aggressively negotiated by the government, biopharmaceutical companies face significantly reduced revenue. This diminishes their capacity to reinvest in research and development. Over time, fewer innovative therapies and clinical trials will be pursued, particularly for complex or rare diseases that carry higher risks and lower potential returns.

Price controls also dampen the incentive for smaller biotech firms, which are a major source of industry innovation. These firms often rely on venture capital and partnerships with larger pharmaceutical companies to fund their research. If investors perceive that potential profits are capped or uncertain due to government pricing policies, they are less likely to invest — cutting off a critical pipeline of innovation before it even begins.

For patients, the long-term effects of diminished innovation are dire. Fewer new drugs mean fewer treatment options, especially for rare and chronic conditions that currently lack effective therapies. Additionally, price control measures may lead to shortages, as companies may limit supply to markets where profit margins are unviable. In trying to make drugs more affordable today, price control policies risk eroding the foundation of future medical breakthroughs.

Read the full op-ed in ROI NJ here.