Posted on 02/05/2020 6:57:40 AM PST by Moonman62
Americans want health care to be less expensive. We also want our health care to be the most innovative in the world. The key to simultaneously achieving both of these goals is good public policy.
Back in September, House Energy and Commerce Committee Chairman Frank Pallone (D-N.J.) introduced H.R. 3, also known as the Lower Drug Costs Now Act of 2019, into the House of Representatives with 105 co-sponsors, all Democrats. The House is set to vote on the bill this week.
H.R. 3 would adopt international reference pricing for the Medicare program in an effort to lower drug costs. In other words, it would impose foreign price controls on the U.S. market. This would indeed reduce prices, but at what cost to innovation?
To answer that question, the California Life Sciences Association, which I head, commissioned a study by Vital Transformation, an international health economics firm, to examine the impact of Medicare Part D foreign reference pricing on California as well as the overall nationwide biopharmaceutical ecosystem.
The results were eye-opening. In exchange for some short-term price reductions, the bill would drastically damage innovative companies across the country. According to the study, this policy would reduce the Part D revenues for U.S. companies by $358 billion over the next five years, a 58% reduction before interest and taxes. The Congressional Budget Office projects a similar decline — $336 billion over five years for U.S. companies overall.
Much of the revenue being lost to H.R. 3 through lower drug costs tied to international reference pricing would have been reinvested in new, potentially lifesaving therapies for patients with cancer, heart disease, diabetes, rare diseases, and many other conditions. Small and emerging companies would bear the brunt of this. The 58% reduction in Part D revenue would reduce the number of new medicines that small and emerging companies bring to market by 88% across the U.S., according to our report. What this means is that if H.R. 3 had been in effect from 2009 to 2019, California’s emerging companies would have produced only three drugs instead of the 25 that actually made it to market.
H.R. 3 would upend the investment cycle. By making draconian revenue reductions, it would drastically reduce cash flow from operations that would otherwise be used to invest in research and development, licensing, partnerships, and milestone-driven agreements. This is an enormous problem. Companies need at least $500 million, and often more than $1 billion, to take a new drug through clinical trials and ultimately receive Food and Drug Administration approval. In addition, only about 8% of drugs that make it into clinical trials achieve that agency approval. It must also be mentioned that receiving FDA approval does not guarantee that a new drug will be profitable.
Emerging biopharma companies depend on investment from larger companies, venture capitalists, and others to have any chance of getting new medicines into and through the approval process and ultimately to the patients who need them. Fewer resources mean investors would take fewer chances. The kinds of high risk/high reward therapies that could help a lot of people would be starved of support.
A recent email I received from a cell therapy company CEO provides important context. This CEO wrote that the company will need heavy investment to bring its cell therapy to market. But the price caps being envisioned in H.R. 3 would dramatically limit the return on that investment. As a result, investors would likely look to a less regulated environment, such as tech, and a promising therapy would never get a chance to help patients.
State of the Union 2020: Why Democrats chanted ‘H.R. 3’ at Trump
https://abc7ny.com/politics/what-democrats-chanted-at-trump-during-state-of-union/5904459/
Thx for posting
So like “rent control” the Dems want price controls on drugs that would ruin the free market...there has to be a way to involve other countries in this...to pay some development costs
Ah, I had never heard of H.R. 3 before last night. Now I know why.
We’ve heard this song and dance before: making drug companies charge Americans the same prices they charge the rest of the world will stifle innovation and we won’t get any more research intensive drugs. I don’t believe the disaster that drug companies predict. It sounds like a similar argument against tariffs. Whatever it takes, American companies cannot sell drugs to the rest of the world at reduced prices and make Americans pay for all of the research and development.
The drug companies are posting large profit margins at the cost to the patients and taxpayers. It can be argued that the companies spend more on drug advertising than they spend on research. There has to be a cap on what drug companies can charge. The patent laws and FDA have effectively created an unsumountable barrier to ‘generic’ insulin.
This cannot continue, as people’s health HAS to take precedence to corporate profits.
We’ve heard this song and dance before: making drug companies charge Americans the same prices they charge the rest of the world will stifle innovation and we won’t get any more research intensive drugs.
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The way it is now, those international price controls cause Americans to pay more.
A better solution is to put maximum pressure on other countries to pay market prices.
The patent laws and FDA have effectively created an unsumountable barrier to ‘generic’ insulin.
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Maybe you should do a separate thread on that topic.
A beautiful sentiment, a bit on the Socialist model, but beautiful nonetheless. What's not so beautiful are the unintended consequences of such thinking, as outlined in this article.
Totally agree with you. This no innovation argument is BS. A lot of drugs advertised are more like a hammer in search of a nail.
Once upon atimeyou could not advertise drugs, lawyers, doctors or hospitals. There was good reasonfor that.
:: But the price caps being envisioned in H.R. 3 would dramatically limit the return on that investment. ::
I dunno but, maybe your ROI expectations could be reset?
One of my husbands inhalers cost 377 a month for a person with no insurance. We pay 45.00 due to my insurance through work.
Seriously, that huge of a mark up? My cousin works part time as Pharm rep and makes 6 figures and gets lots of trips for perks.
My office visit for A1C check and foot check is 180.00 and husbands is 240.00 as he has Polymalagia Rheumatica and this can last a year or more and you have to be on Prednisone for year or more. He also has 2 spine fusions and his spine is degenerating. He now has COPD due to where he worked for 30 years. Yes he gets excellant care and we love our Doctor. But still if we had no insurance that would be the approximate price.
We only pay 25.00 copay and 30.00 for specialist.
Since 1992 we already have a form of drug control policy”
Where I worked at a major Hospital we currently have 340B program. The 340B Drug Pricing Program has provided financial help to hospitals serving vulnerable communities to manage rising prescription drug costs.
Section 340B of the Public Health Service Act requires pharmaceutical manufacturers participating in Medicaid to sell outpatient drugs at discounted prices to health care organizations that care for many uninsured and low-income patients. These organizations include community health centers, children’s hospitals, hemophilia treatment centers, critical access hospitals (CAHs), sole community hospitals (SCHs), rural referral centers (RRCs), and public and nonprofit disproportionate share hospitals (DSH) that serve low-income and indigent populations.
thank you
I did not understand the bill and thought the idea sounded good
Now I get that it would be a disaster for research on new drugs that will save lives in the future
Thanks for this posting.
I was wondering what those white-feathered hens were clucking.
Yet another example of how low the leftists in congress have burrowed.
Mark
Why would we EVER tie any of our policies to anything foreign?
Please tell us, Bernie--that is you, isn't it? How much should companies be permitted to spend on advertising, here in the United States? Should every company be restricted, or just pharmaceuticals? What business are you in? Can we put a "cap" on what your industry makes?
If a company wants to manufacture insulin (which is a super-expensive process, by the way), they're free to do so. The FDA and patent laws don't restrict a company from doing so. You're just ignorant of the process, and you believe that anything that comes in small vials and pens must be cheap to make.
That said, Sanofi, Lilly and Novo Nordisk have all offered various generic forms of insulin in the past year or two, and all have some type of patient affordability program where most patients pay under $100/month for their insulins.
The lives and health of people ARE first and foremost in most of the pharmaceutical industry. We know it does no good to have life-saving medicines if people cannot afford them, but profits drive new innovation and are vital to the industry.
Half the commercials on tv are for some drug you need to go talk to your doctor about.
I dunno but, maybe your ROI expectations could be reset?
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Why don’t you start your own drug company and set an example?
Why...that’s effing BRILLIANT!
You are a rhetorical gem.
Please...don’t hesitate to post your pithy thoughts every where.
Everyone on FR is awaiting your genius with bated breath.
Well, except humblegunner. He’s just a curmudgeon.
BUT, he’s our curmudgeon.
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