It is a harrowing proposition: that in trying to control drug prices for 67 million Medicare patients now, we might inadvertently prevent the development of future drugs that could save lives. Implied, if not stated outright, is that we’re putting a cure for cancer or Alzheimer’s or some other intractable disease in jeopardy.
But we have good reasons to believe that the current policy won’t have such a trade-off any time soon. For one, pharma is hugely profitable, and these negotiated prices, while potentially chipping away at profit margins, should hardly entirely dampen the incentive to innovate, according to a couple of key studies of the industry. Two, if we are worried about future innovation, we should be focused on making it cheaper to develop drugs – and this is actually one area where AI is showing promise. By identifying the best candidates for possible treatments early in the research process, we could speed up development and continue to reduce costs — without losing out on tomorrow’s breakthroughs. …
In general, I think “Big Pharma gets rich off taxpayer funded research” is kind of like “Ford gets rich off taxpayer funded roads” or “Apple gets rich from taxpayer funded schools”. They are true in one sense, but that doesn’t mean those companies would pay for those things. That’s why government ends up paying for common goods.
Note that “Big Pharma gets rich off taxpayer funded research” is different from “Big Pharma charges more than necessary to cover its own research costs.” You can find a pretty good analysis of those costs here.