The current state of political affairs in the U.S. does not bode well for the direction of that turn. The country is at real risk of losing its long-held lead in biotech innovation.
For decades, the United States has dominated the global biotech industry, thanks to a policy environment that incentivized American scientists, entrepreneurs and investors to develop novel therapies and medical devices. But counterproductive proposals and decisions—from the courts, from Congress and from the executive branch—are making it increasingly challenging for the United States to retain that leadership for decades to come.
Research and development has always been a risky venture. It can take over a decade and billions of dollars to bring a medicine to market, after accounting for the fact that more than 9 out of 10 drug candidates fail to receive FDA approval.
And the cost and complexity of research is only mounting. Companies can only justify continued investments if there’s a reasonable chance that the rare successes will generate enough revenue not only to pay for themselves but also the many failures, ultimately funding future efforts as well as rewarding investors and eliciting further infusions of capital.
Today, those 9-out-of-10 odds look increasingly optimistic. As legal rulings threaten the patent protections for new classes of innovation and further strain university tech transfer offices, drug pricing rhetoric threatens to further undermine return on investment in biopharma.
Weakening IP Protections
Supreme Court rulings have muddied the waters on whether certain discoveries—particularly in fields like medical diagnostics and artificial intelligence—are even eligible for patent protection. When patent eligibility is unclear or entire classes of inventions are excluded, the incentive to innovate and invest in those areas diminishes.
Unless lawmakers rectify the situation by passing the Patent Eligibility Restoration Act to functionally reverse those rulings, investors will continue to withhold funding from scientifically promising ideas—and patients and doctors will have fewer novel therapies and medical technologies to choose from.
Just recently, Commerce Secretary Howard Lutnick threatened to further undermine America’s once-world-leading system of intellectual property protections—by calling on the federal government to confiscate much of the revenue that universities receive from licensing patents stemming from federally funded research.
University technology transfer offices—which spearhead many of the licensing agreements that help move research breakthroughs from academic labs to the private sector and ultimately to patients’ medicine cabinets—already operate on razor-thin margins. Confiscating much of their revenue would limit universities’ ability and incentive to facilitate tech transfer agreements, and thus prevent biotech startups from licensing promising technologies.
If we want to preserve America’s leadership in biotech, the government should fund discovery and protect intellectual property, then let the private sector do what it does best: take the risk of development and deliver results at scale.
Drug Pricing Pressure
Meanwhile, Congress has imposed price controls on an expanding number of drugs through the Inflation Reduction Act. Since the IRA was passed in 2022, 55 research programs and 26 drug candidates have been discontinued—with the cancellations disproportionately impacting small-molecule drugs that receive four fewer years of exemption from price negotiations. Eliminating this “pill penalty” and giving small-molecule pills and large-molecule injectable biologics the same 13 years of exemption—as the bipartisan EPIC Act would do—would blunt some of the IRA’s damage.
But instead of endorsing such efforts and seeking to roll back these price controls, the Trump administration has sought to expand them with Most Favored Nation drug pricing policy proposals. The Centers for Medicare & Medicaid Services recently released two proposed payment models, GLOBE and GUARD, that would significantly restructure Medicare drug reimbursement by tying Medicare Part B and Part D drug prices to those paid in foreign countries with strict price controls.
It’s true that many of our peer nations effectively freeload off of our innovation. But the solution to this freeloading is to press wealthy foreign countries to pay their fair share for innovation. To the administration’s credit, it did recently ink a deal with the United Kingdom, which agreed to double its spending on medicines as a share of GDP.
Striking more such deals—and thus more equally sharing the R&D burden among all developed nations—is a far better way to relieve patients while incentivizing more U.S. research, development and manufacturing than adopting an “if you can’t beat ‘em, join ‘em” approach to freeloaders.
American patients and workers cannot afford for policymakers to undermine the investment incentives that have catalyzed decades of drug discovery. Preserving our status as the world’s innovation leader requires a policy environment that rewards risk-taking.
