Price Controls vs. Pandemic Vaccines

By SBE Council at 16 November, 2020, 10:56 am

by Raymond J. Keating-

Government price controls are never good ideas, unless, that is, your objective is to limit or decrease investment, entrepreneurship, research, invention, innovation, competition and dynamism in an industry.

One would think that the last industry that government would want to risk with such destructive regulations would be the pharmaceutical sector. After all, this is the industry that faces enormous costs, uncertainties and risks in order to generate new and improved drugs, i.e., medicines, therapeutics and vaccines. What this industry produces literally improves, extends and saves lives. This should come through loud and clear during the current pandemic.

The COVID-19 pandemic has been devastating to public health and people’s lives. Global deaths, according to the Johns Hopkins Coronavirus Resource Center, as of the morning of November 13, have reached nearly 1.3 million, including more than 242,000 in the United States. But perhaps this challenging public health crisis will open the eyes of policymakers, so that they cease destructive efforts to impose price controls on the biopharmaceutical industry.

Consider the investments and mobilization the industry has undertaken to create vaccines and therapeutics to eventually make COVID-19 a deadly thing of the past.

News on a possible new vaccine from Pfizer and BioNTech on Monday, November 9, was exciting and hopeful, with the companies reporting that their vaccine has experienced better than 90 percent effectiveness in testing. Phase 3 testing is continuing, with a two-month safety observation period to be hit during the third week of November.

In addition, Moderna announced on November 16 that preliminary trial data showed its coronavirus vaccine was more than 94% effective.

Moreover, the treatments and therapeutics for treating COVID-19 have greatly improved since the onset of the pandemic.

Of course, there remain unknowns about the vaccines, and others will be needed. Therefore, the U.S. and the world need to have entrepreneurial, dynamic pharmaceutical businesses poised to develop vaccines and therapeutics, along with researching and developing cures for so many other diseases and ills.

And I use the work “entrepreneurial” deliberatively. The pharmaceutical manufacturing industry overwhelmingly is about smaller businesses. Consider the following (2017 latest data from the U.S. Census Bureau):

Keep in mind that Pfizer started out as a small entrepreneurial venture by cousins Charles Pfizer and Charles Erhart housed in a brick building in Brooklyn, New York, in 1849.

Rather than considering and threatening price controls, policymakers should be engaging in tax and regulatory relief that will allow entrepreneurship and investment to flourish in the pharmaceutical industry – as well as in all other industries especially during this brutal economy.

Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council.