Congress may soon inadvertently wreck Puerto Rico’s economy.
Lawmakers are considering imposing European-style price controls on prescription drugs. That would cause American biotech companies to lose billions in revenue and inevitably force them to slash research and development budgets, cancel plans to build new factories, and lay off workers. One recent study estimates that the price controls, if applied to all prescriptions filled through Medicare and Medicaid, would reduce biotech companies’ revenue by 49% and result in a nearly equivalent cut to research and development spending.
That would harm the U.S. economy in general. America’s biotech industry is one of the country’s largest employers and most productive industries. It supports roughly 10 million jobs and contributes over $3 trillion to annual economic output.
PUERTO RICO, SUGAR, AND CRONY CAPITALISM
But price controls would hammer Puerto Rico in particular. The island is one of the most specialized pharmaceutical and medical device manufacturing hubs in the United States. In fact, it’s the leading exporter of pharmaceutical products within the U.S. customs system. Pharmaceuticals alone account for nearly 75% of the island’s total exports and contribute 30% to the island’s GDP.
Nearly 87,000 Puerto Ricans work directly or indirectly in the bioscience industries, earning wages well above the private-sector average. Biotech companies from around the world rely on this highly skilled workforce to operate more than 50 FDA-approved pharmaceutical plants and bring “Made in USA” treatments to patients.
At a time when Washington is urging companies to reshore critical supply chains and reduce dependence on geopolitical competitors, Puerto Rico offers a uniquely attractive solution to companies thinking about repatriating their operations. The island provides companies with regulatory certainty. And since Puerto Rico is a U.S. territory, companies don’t need to worry about tariffs.
But price controls would more than cancel out these advantages and force companies to cancel expansion plans, whether in Puerto Rico or on the mainland.
Fortunately, there are other ways for lawmakers to make medicines more affordable. Middlemen in the drug supply chain, such as pharmacy benefit managers and insurers, currently capture a far larger share of spending than in the European countries that lawmakers envy for their low drug prices. Today, more than half of every dollar spent on brand-name medicines goes to these middlemen.
In other words, Congress could make drugs cheaper for ordinary patients without needing to impose economically ruinous price controls by cutting these middlemen down to size. Lawmakers could require that the discounts drug companies already provide to middlemen be passed directly to patients at the point of sale. They could also increase transparency around how pharmacy benefit managers are compensated.
ENERGY DEPARTMENT CANCELS MILLIONS OF SOLAR FUNDING FOR PUERTO RICO
America’s position at the forefront of biopharmaceutical innovation depends on policies that encourage domestic investment and maintain a predictable regulatory and economic environment. Puerto Rico has spent decades building exactly that environment.
Congress now faces a consequential choice. It can strengthen a U.S. manufacturing base that produces critical medicines for American patients. Or it can import foreign price controls that risk pushing future investment and high-skilled jobs elsewhere.
Joel Berrocal is the executive director of The National Puerto Rican Chamber of Commerce.