Deregulation: The Real Cure for High Drug Prices and Stalled Innovation

Americans deeply value the life-saving power of prescription drugs, yet they remain deeply anxious about being unable to afford the medicines they need. This contradiction underscores a central policy dilemma: how to encourage breakthrough innovation for tomorrow’s treatments while ensuring today’s medicines remain affordable.

Unfortunately, many current policies—including those enacted through the Inflation Reduction Act (IRA)—miss this delicate balance.

Under the IRA, beginning January 2026, the federal government will impose price controls on the first 10 drugs under Medicare Part D, with more to follow. While these controls may promise short-term affordability, they risk undermining long-term innovation by stripping away the financial incentives that drive research and development. This isn’t just a future concern—it directly affects today’s patients who are still waiting for viable treatments.

The Executive Order: A Better Path Forward

In contrast, the April 15th Executive Order (EO) introduces meaningful reforms that target the root causes of affordability problems without stifling innovation.

One glaring issue it addresses is the inequitable distribution of drug revenues. Shockingly, manufacturers only receive about 50 cents of every dollar spent on medicines. The rest is siphoned off by pharmacy benefit managers (PBMs), insurers, and hospitals, thanks to a complex and opaque system of rebates and discounts that rarely translate into lower out-of-pocket costs for patients. By mandating a regulatory review, the EO aims to increase transparency and ensure patients benefit directly from these hidden discounts.

Reforming the Broken 340B Program

Another area in desperate need of reform is the 340B drug pricing program, originally intended to support vulnerable patients in rural and underserved areas. Instead, it’s become a cash cow for large hospitals and pharmacy chains, many of which now provide less charity care than the national average. Worse, the unchecked growth of the 340B program is driving healthcare consolidation, increasing costs, and reducing patient choice.

The EO’s push to restore the program to its original mission—via legislative support—is a welcome move that could correct this systemic abuse.

Removing the “Pill Penalty” on Small Molecule Drugs

Beyond affordability, the EO also focuses on reinvigorating pharmaceutical innovation. A clear example of misaligned incentives is the “pill penalty” introduced by the IRA. Currently, small molecule drugs—often oral pills—are subjected to price controls just 9 years after FDA approval, compared to 13 years for biologics (typically administered in clinics). This has disincentivized investment in small molecule drugs, which are not only more convenient and affordable but also crucial in treating diseases like cancer.

The EO proposes a harmonized approach, asking federal agencies to work with Congress to ensure small molecule drugs are not unfairly penalized.

The Danger of Importing Price Controls

However, not all provisions of the EO are sound. The proposal to increase prescription drug importation may seem like a cost-cutting strategy but essentially imports foreign price controls into the U.S. Such measures could further reduce incentives for innovation, lead to drug shortages, and ultimately worsen health outcomes.

Striking the Right Balance

Despite its few shortcomings, the April 15th EO offers a much-needed shift in pharmaceutical policy. It moves beyond the blunt tool of price controls and toward smart deregulation that improves affordability without sacrificing the future of medicine.

By increasing market transparency, reforming flawed programs, and removing biased disincentives, the EO represents a balanced strategy—one that honors the promise of medical innovation while tackling the very real issue of drug affordability.

If implemented effectively, it could mark a turning point for the U.S. healthcare system—benefiting both the patients of today and those depending on the cures of tomorrow.