Threats to our nation’s security take on a myriad of forms. Sometimes the most serious risks arise from the unintended consequences of policies put in place to address seemingly unrelated issues.
One example is a push domestically to advance a “most favored nation” drug pricing model. The policy imports foreign price controls and imposes them on America’s pharmaceutical and biotech industry – price controls that would benefit communist China while threatening American national security.
Such proposals – which are intended to arrest the high relative cost of prescription drugs in the U.S. – have captured recent headlines. But they create far more problems than they purport to solve and would hamper American biotechnology dominance to the benefit of China.
As an elected state legislator, I believe that the supply and economic consequences are a significant problem. When those issues are combined with the national security implications, as a retired Army intelligence officer it causes me grave concern.
Shortages and curtailing research
Price controls simply do not work. They are, in reality, counterproductive as a means of controlling costs. It is basic economics. Price is the mechanism by which supply and demand sort each other out. When prices are too high, it is because something has happened to throw off the equilibrium of the market.
By arbitrarily setting prices too low, without addressing the actual cause, that equilibrium is further distorted. Every time and everywhere price controls are imposed, the result is a shortage. Some of us, for example, remember the gas lines of the 1970’s, which were a direct result of price controls.
It’s like that old joke from the Cold War: What would happen if the Soviets took control of the Sahara Desert? Answer – nothing, for 50 years. Then there would be a shortage of sand.
It’s true that the United States has been indirectly subsidizing foreign countries’ drug price controls for far too long. While Canada, Australia and European nations place price caps on mostly U.S.-made pharmaceuticals that are far below cost, those drug manufacturers are forced to make up the difference in the U.S. market, shifting a disproportionate share of the cost onto American consumers.
But adopting their bad policies is not the answer. One of the unintended consequences of imposing an artificial ceiling on drug prices will be to reduce the resources available for research and development of new and more effective drugs and other biotechnologies.
All these new, innovative therapies that have cured diseases and improved our quality of life do not come magically or cheaply. American drug manufacturers currently dedicate roughly 20 percent of revenues toward R&D, investment that will be eroded by the importation of foreign price controls. This would inevitably delay the introduction of new drugs and slow U.S.-led innovation in pharmaceutical and biotech research to a crawl.
Giving China the advantage
Meanwhile, America is pursuing a route that will shackle its biotech industry to the socialist policies of Europe, the UK and Canada. At the same time, our biggest geopolitical adversary is steadily ramping theirs up. Chinese Communist Party (CCP) leaders make no secret of their intent to leverage biotechnology to their economic and military advantage globally, even calling biotech a “strategic emerging industry.”
China is investing more in biopharmaceutical R&D than any other country on earth, to the point where it is already starting to outpace the U.S. in drug development. A rather chilling report issued in April by the National Security Commission on Emerging Biotechnology (NSCEB) outlines the problem.
Among the report’s findings: China has more than 100 biotechnology research parks and 17 industrial clusters dedicated to biotech research; Chinese biotech firms saw a $300 billion increase in market value between 2016 and 2021; in 2019, China filed 22% of all international patents, more than the U.S. or the EU; and China accounts for 60% of the world’s most-cited synthetic biology research papers.
The risk to the U.S. of ceding supremacy in this arena could be catastrophic. Imagine the next pandemic – one far worse than Covid, or a weaponized virus unleashed on our shores; do we really want to be dependent on China for the biotechnology necessary to defeat such a threat?
There are better solutions to our problems. These include strengthening intellectual property rights, enabling market incentives like tax credits for domestic drug manufacturing and enacting regulatory reforms that will streamline drug approvals and provide predictability. They outweigh copying failed socialist polices of other nations that will cripple our biotech and pharmaceutical industries and cede our dominance in that sector to China.
Finding the right solution begins with recognizing the critical importance of maintaining our biotech supremacy.
