The Senate’s latest price setting proposal will undermine U.S. economic growth

Nicole Longo
Nicole Longo August 3, 2022

The Senate’s latest price setting proposal will undermine U.S. economic growth.

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Last week, we examined ways the latest drug pricing proposal will undermine patient access to medicines, American medical innovation and our health care system as a whole. But there is another consequence that we can’t leave out: the impact this proposal will have on the biopharmaceutical industry’s contributions to American jobs and the economy.

A new analysis from Avalere estimates the negotiation provision alone in the Senate’s drug pricing policy would reduce biopharmaceutical industry revenues by at least $455 billion over the next decade. On top of that, analysis from the Congressional Budget Office implies an additional $190 billion reduction in industry revenues from the inflation penalty provisions.[1] That brings the total cost to the industry to more than $645 billion. This reduction will have a direct impact on the U.S. biopharmaceutical industry’s ability to continue its investments at current levels and support U.S. jobs.

The growing biopharmaceutical industry is a driver for both the national U.S. economy and local economies. Research shows that biopharmaceutical companies and their supply chains play key roles in supporting a wide range of jobs in every state across the country. In fact, nearly every state is involved in the manufacturing of FDA-approved medicines, and the biopharmaceutical industry directly employed more than 900,000 workers across the United States in 2020. The drug pricing policy in Congress would put those jobs at risk.

If industry revenues decline by $645 billion over the next decade, it is estimated that more than half a million industry-supported jobs across the United States would be permanently lost. Vital Transformation, which estimates annual revenue reductions from the bill consistent with Avalere’s estimate,[2] found that nearly 600,000 U.S industry jobs would be lost by 2031. This includes more than 100,000 jobs in California and nearly 50,000 jobs in New Jersey. The list goes on and the impact will be felt in every single state where there is a pharmaceutical presence.

This bill does not do nearly enough to help Americans afford their medicines, yet it does far too much harm to our economy, our access to medicines, our continued global R&D leadership and our health care system as whole.

Learn more about why government price setting is bad policy and better ways Congress could help patients access and afford their medicines.

Take action: Tell Congress to protect access to new medicines.


[1] In a budget impact estimate released on July 8th, CBO found $62 billion in direct inflation penalty savings, plus an additional $38 billion in increased federal revenue. This latter figure comes from changes in the value of employer sponsored health insurance, of which the government only captures about 30% due to the tax exclusion.  Thus, the implied industry impact is roughly $125 billion ($38 billion divided by 0.3).  Adding this $125 billion to CBO’s direct savings estimate of $62 billion total estimated industry revenue reduction of about $190 billion.

[2] Estimates from Avalere and Vital Transformation of industry revenue reduction from the legislation are broadly consistent. Avalere’s estimate of $455 billion revenue reduction from negotiation over seven years of implementation ($65 billion per year) combined with CBO’s implied revenue reduction from the inflation penalty over nine years ($21 billion per year) yields a total estimated revenue reduction of $86 billion per year. Vital Transformation estimates a similar revenue reduction $82 billion per year.

Topics: Research and Development, Economic Impact, Medicare, Policy Solutions, Government Price Setting