Moderna’s recent disclosure that it plans no new late-stage vaccine trials because of policy uncertainty in the United States is a chilling consequence of the Trump administration’s anti-vaccine turn. It’s also symptomatic of a deeper sickness threatening American dominance in pharmaceutical innovation.
Health Secretary Robert F. Kennedy Jr. is systematically eroding a vaccination infrastructure that has saved countless children from death and deformity. After a quarter-century, America is on the verge of losing its measles elimination status. Now he’s tinkering with the liability system that keeps vaccine manufacturers economically viable.
This will reverberate across the rest of the world, which allowed itself to become overly dependent on Americans subsidizing pharmaceutical research and development.
It takes over $2 billion and 10 years to bring a single new drug to market, according to economist Tomas Philipson. The drugs themselves may cost relatively little to manufacture, but the staggering cost of discovering them needs to be recouped during the limited period in which the drug remains patented — typically 12 to 14 years. Drugmakers charge premium prices for brand names before generic copies can flood the market.
At least, that’s how it works in the U.S. Europe has long used government power to pressure drugmakers to sell medicines at something closer to the cost of producing the pills, knowing American consumers will cover the bill for inventing them in the first place. Even the Europeans admit that the U.S. is the primary market for new drugs: North America account for 53.3 percent of global pharmaceutical revenue compared to 22.7 percent for Europe, even though Europe’s population is significantly larger.
The Europe model sounds great to American populists, who long to copy it. A law enacted under the Biden administration forced down the price of the most popular drugs. The Trump administration has sought to extend that policy further, pegging American prices to those of comparable nations. But there are downsides to soft price controls, even apart from the drugs that will never get developed because the American market isn’t big enough to support the R&D costs.
Free-spending Americans get new drugs faster than their counterparts across the Atlantic. Two-thirds of new drugs are launched first in America, compared to 16 percent in Europe. And the lackluster domestic market has undermined the competitive position of what used to be Europe’s world-leading pharmaceutical industry.
Now an even larger problem is becoming apparent. Saving money on drugs by forcing others to pick up the tab for R&D is a bit like sneaking onto a neighbor’s WiFi — a great deal until something goes wrong. If the neighbor moves, or loses his job, or the cable goes down when he’s vacationing, you’re out of luck.
Europe’s free riding has left the world vulnerable to bad American policy. In a better world, America would recommit to a healthy vaccine market, and other developed nations would rethink stingy reimbursement rates and excessive regulation.
If they don’t, China is going to surpass the West as the world’s pharmaceutical leader. Beijing has invested heavily in biotechnology and life sciences, and those are bearing fruit. In 2024, China surpassed the U.S. in the number of clinical trials underway, and that was before the Trump administration started playing games with university research budgets.
China’s pharmaceutical industry, long-known for making precursor chemicals and cheap generics, is steadily moving up the value chain into innovative compounds. If China gains the upper hand, the U.S. risks seeing supplies of critical drugs held hostage during conflict. The pandemic gave a taste of what that might look like, as did China briefly cutting off U.S. access to critical minerals. No one in the free world wants to face blackmail to access cutting-edge medicines.
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