Health care policy often carries unintended consequences. The Inflation Reduction Act’s “pill penalty,” for example, gave small-molecule drugs — which often take the form of pills — a shorter window of exemption from Medicare price-setting than biologics, which investors say disincentivizes innovation in small-molecule medicines that have the potential to treat cancer, neurological diseases, and more. Another IRA provision limited price-negotiation exemptions only to orphan drugs approved to treat a single rare disease, discouraging follow-on rare disease research until lawmakers broadened those exemptions in the One Big Beautiful Bill Act.
Now attention has shifted to codifying most-favored nation (MFN) pricing — a policy that would peg U.S. drug prices to those paid in other developed countries with price controls — and patent fees, which would add a 1-5% fee on more than 2 million patents in force in the United States. While intended to lower costs and strengthen domestic industry, these policies could do the opposite — eroding the returns that fund U.S. biomedical innovation and giving China the upper hand.