Sally Pipes Addresses ALEC Summit on the Hidden Costs of Pharmaceutical Price Controls
Leveraging the power of market competition and strong intellectual property protections allowed the U.S. to dominate globally in biopharmaceutical innovation. But that status isn't guaranteed.
Last week, Sally C. Pipes, Founder and Chair of the Benjamin Rush Institute and one of the nation’s leading advocates for market-based health care reform, delivered a forceful address at the
American Legislative Exchange Council’s National Policy Summit, held in Fort Worth, Texas—a conference which drew 1,200 attendees, including policymakers, legislators, and thought leaders from around the country. In her remarks, titled “Balancing Access, Affordability, and Innovation: The Hidden Costs of Pharmaceutical Price Controls,” Pipes warned that growing political enthusiasm for drug-price controls risks undermining the very engine of medical innovation.
Why Pipes Wrote Her Latest Book
Pipes believes that too many Americans—and far too many policymakers—take the nation’s global leadership in biopharmaceutical innovation for granted.
That leadership is now under threat.
Both parties have embraced some form of government-set drug prices, including the Biden administration’s price caps on ten Medicare drugs beginning in 2026 and the Trump administration’s plans to impose price controls on additional therapies in 2027 under the Inflation Reduction Act. Industry analysts estimate the IRA will divert $300 billion from research and development—money that would otherwise fund future cures.
“Price controls were back on the policy menu in this country,” Pipes said. “Their proponents seemed to think that government regulation of drug prices would simply make medicine more affordable and accessible, with no downside. But there’s plenty of downside to price controls, as the experiences of other countries indicate.”
This lack of appreciation for America’s dominance in biopharmaceuticals motivated Pipes to write her recent book, titled The World’s Medicine Chest: How America Achieved Pharmaceutical Supremacy — and How to Keep It.
How the U.S. Surpassed Europe in Drug Innovation
When asked what enabled the U.S. to surpass Britain and the rest of Europe in pharmaceutical breakthroughs, Pipes pointed to “a combination of America’s shrewd reforms and Europe’s self-inflicted wounds.”
In the 1970s, Europe was the epicenter of drug development. By 2004, every major European nation had adopted drug-price controls, crushing their once world-leading pharmaceutical R&D infrastructure. Meanwhile, U.S. policy moved decisively in the opposite direction.
Pipes emphasized the importance of the Bayh-Dole Act of 1980, which allowed universities to license publicly funded discoveries to private firms, helping turn academic science into lifesaving therapies. This framework took root just as European countries were expanding government-run health systems and layering on price restrictions.
The result: today the United States produces roughly two-thirds of the world’s new medicines, and companies that once headquartered research in Europe have relocated to America.
She noted that Britain appears to be reconsidering its course. A new U.S.–U.K. trade agreement finalized on December 1 requires Britain to spend 25% more on new medicines and reduce its rebate demands—an effort to lure back pharmaceutical investment that had stalled in recent years.
Why Strong Intellectual Property Rules Matter
Pipes underscored that intellectual property protections—patents, data exclusivity, and special rules for orphan drugs and biologics—are essential to incentivizing the massive investments required to develop new medicines.
“Developing a drug takes over a decade, costs about $2.6 billion, and fails 90% of the time,” she said. Without enforceable IP protections and a predictable environment for recouping those investments, many promising therapies simply wouldn’t exist.
The Inflation Reduction Act weakens these incentives. Small-molecule drugs can now face price controls just nine years after approval; biologics after thirteen. Since many meaningful innovations occur after a drug’s first approval, the law threatens an entire class of follow-on research—particularly in oncology, where more than 40% of therapies approved since 2000 received subsequent approvals for additional uses.
How Price Controls Damage Innovation and Patient Access
Pipes argued that price controls not only shrink research budgets but inject enormous uncertainty into the business models that sustain drug development. The result, she explained, is predictable: fewer new medicines, longer delays before innovative drugs reach patients, and shortages of existing therapies.
She pointed to Europe and Canada as cautionary examples. Of medicines launched between 2012 and 2021:
Germany had access to 61%
United Kingdom: 59%
France: 52%
Canada: 45%
Meanwhile, American patients had access to 85% of those drugs.
These discrepancies, she warned, are exactly what the United States should expect to see if it begins importing foreign-style price controls through mechanisms like Most Favored Nation (MFN) pricing.
Economist Tomas Philipson, who wrote the foreword to Pipes’s book, projects that the IRA’s price-control regime could prevent 135 new medicines from reaching the market by 2039. Research investment is already falling: funding for small-molecule R&D has dropped 70% since the IRA’s introduction, and companies have halted or abandoned more than 80 research programs.
Making Drugs Affordable Without Sacrificing Innovation
Pipes argued that America’s generics market already makes most drugs affordable. To that point, 90% of prescriptions filled each year are for generic medicines costing just a few dollars.
Where affordability problems persist, she said, the biggest culprit is not drug companies but pharmacy benefit managers (PBMs). The three dominant PBMs—Express Scripts, CVS Caremark, and Optum—control more than 80% of the market and use their leverage to demand massive rebates from manufacturers in exchange for formulary placement.
These opaque rebate structures raise out-of-pocket costs for patients, even when the list price of a medicine hasn’t changed.
PBM Reform: Transparency and Accountability
For lawmakers looking to fix the system without undermining medical innovation, Pipes made the following recommendations:
“For one, lawmakers need to bring some transparency to the PBM industry. These companies should be required to disclose the value of the discounts they receive from drug firms. And they should be required to share the bulk of any discounts they secure with patients at the pharmacy counter.”
She went on to say that spread pricing—where PBM’s charge insurers more than a drug actually costs after accounting for discounts and pocket the difference—is an example of a policy that needs to be abolished.
Pipes also warned against state-level initiatives like Prescription Drug Affordability Boards and reference pricing systems—both of which amount to decentralized price control regimes.
“With fifty different pricing authorities, costs and uncertainties multiply,” she said. “That’s disastrous for innovation.”
She also highlighted emerging direct-to-consumer models from manufacturers like Pfizer and Eli Lilly, predicting that bypassing PBMs altogether could meaningfully reduce patient costs.
Reforming the 340B Program
Originally designed to support hospitals serving low-income and rural patients, the 340B program has ballooned from $6.6 billion in 2010 to $43.9 billion in 2021. Pipes argued that many participating hospitals no longer meet the program’s intent: only 32% are located in medically underserved areas, and 65% spend less than the national average on charity care.
She urged significant oversight and eligibility reform to ensure 340B savings benefit patients, not hospital operating margins.
Why America Still Leads—and What It Risks Losing
Pipes emphasized that America’s pharmaceutical leadership is the result not just of proactive reforms like Bayh-Dole but also of the policy mistakes the U.S. consciously avoided for decades, namely broad drug-price controls and patent seizures. Those norms, she warned, are now eroding.
The media narrative of “excessive” pharmaceutical profits also fails to withstand scrutiny. Drugmakers reinvest a larger share of revenue into R&D than any other manufacturing industry—about six times more, on average. That investment has paid off in breakthroughs like GLP-1 therapies, which are now reshaping obesity, addiction treatment, and cardiometabolic disease care.
“We all benefit from those R&D investments, in the form of new drugs,” she said. “Just think about how big an impact GLP-1s have had. Earlier this decade, it appeared that the obesity epidemic would proliferate unobstructed. Now, the prevalence of obesity is declining. GLP-1s deserve a lot of the credit.”
Finally, Pipes addressed TrumpRx, the Trump administration’s proposed direct-purchase drug marketplace tied to MFN pricing. While it’s too early to know how effective the program will ultimately be, Pipes noted that Medicaid already receives steep discounts. She also described recent MFN-linked deals between the administration and Pfizer, AstraZeneca, Eli Lilly, and Novo Nordisk. By agreeing to sell their GLP-1s under the TrumpRx/MFN model, they enjoy some reprieve from tariffs and customers get cheaper drugs. A win for both sides.
Conclusion
Pipes closed her remarks by reasserting that America’s leadership in medical innovation is exceptional—but not inevitable. Policies that weaken intellectual property rights, suppress prices, or destabilize investment incentives will slow the development of future cures and restrict access to existing ones.
“Competition—not price controls—is what drives affordability, accessibility, and scientific progress,” she said. “If we want the next generation of lifesaving breakthroughs, we must protect the system that made them possible.”
Strong case for IP protections driving innovation. The policy reversial paradox is fascinating though: Britain commiting to 25% higher drug spend while US implements IRA price caps. If Philipson's projections on 135 foregone medicines are even half-right, we're trading short-term affordability for long-term acces to breakthroughs.