The future of medical innovation in America is at a crossroads.
Biopharmaceutical science is accelerating at a record pace, leading to new discoveries that are radically reshaping our ability to fight disease. At the same time, politicians in Washington, D.C., are considering legislation to lower drug costs this week that threatens this progress and would put us on a path to government-run health care.
As president and CEO of PhRMA, I recently got a chance to meet with scientists and tour the labs at several biopharmaceutical companies that are pioneering research in cell and gene therapies, two of the most promising areas of scientific research.
Cell and gene therapies are not medicines in the traditional sense. They are entirely new approaches to treating disease that involve modifying a person’s own cells to attack disease at the root cause.
The results have been profound: Cancer going into remission. Children regaining their eyesight. Babies who once had difficulty moving now able to sit upright on their own. These patients, who just a few years ago faced a lifetime of invasive and costly doctor visits, hospital stays, and medical procedures, can now get a one-time injection instead.
Getting here has not been easy. Biopharmaceutical companies invest more than $97 billion a year on research and development, pursuing new areas of science that may take decades to come to fruition, if ever. In fact, 90% of all medicines entering clinical trials fail along the way.
Cell and gene therapies are incredibly complex and difficult to produce, requiring state-of-the-art production facilities and custom technologies that can turn normal genes and immune system cells into weapons that fight disease. Companies make these investments because they see promise in the science that can change patients’ lives for the better. And they are able to do that because the U.S. has a competitive, market-based system that rewards taking risks.
That system is now at risk.
Speaker of the House Nancy Pelosi recently unveiled her drug pricing proposal (HR 3, also known as the Lower Drug Costs Now Act of 2019), which is being debated in key congressional committees this week. It is unprecedented in size and scope, dramatically expanding the role of the federal government in health care decision-making. It also opens the door for bureaucrats in the United States and in foreign countries to determine the type of research companies should pursue and how and when patients can access new treatments and cures.
The speaker claims that her plan to lower drug costs allows the government to “negotiate” prices for 250 medicines, but that is not how it would work. The legislation creates a “ceiling price” based on the average price a medicine is sold in six foreign countries with government-run health care systems — countries that limit patient access to innovative treatments. The legislation also sets a “target price,” which equals the lowest price of the medicine in any of the six countries.
Biopharmaceutical companies can accept the target price or attempt to convince the government they should be paid closer to the ceiling price. But unlike a negotiation in which both parties have leverage, if a company does not accept the price the government is willing to pay for a medicine, it is forced to pay a tax of up to 95% of sales of the medicine. That is not negotiation.
Government-set prices would replace privately negotiated prices in Medicare and the commercial marketplace — prices that are growing at less than the rate of inflation. Insurance companies would get to pay the lower prices while still being free to exclude coverage of certain medicines, increase out-of-pocket costs, or second-guess health care decisions made by patients and their doctors.
The legislation creates a windfall for the government and insurance companies without providing any guarantee that patients can get the medicines they need.
Initial estimates indicate that these changes would siphon in excess of a trillion dollars from biopharmaceutical companies over the next decade. To put this in perspective, the annual impact would far exceed the entire biopharmaceutical industry’s investment in R&D every year. And the Congressional Budget Office says that the plan “would result in lower spending on research and development and thus reduce the introduction of new drugs.”
The biopharmaceutical industry supports more than 4 million jobs across the country. As many as 1 million of these jobs are at risk of being lost if these cuts are enacted, including nearly 140,000 jobs in Speaker Pelosi’s own state of California.
Patients would be hit the hardest.
While we have made tremendous progress in the fight against disease, there is still a long way to go. We do not have effective therapies for some of the most debilitating and costly diseases like Alzheimer’s, Parkinson’s, and ALS. And more than 90% of rare diseases still have no treatment options.
The speaker offers false promises that the National Institutes of Health can replace the role of the industry in drug development, ignoring that the NIH scope is limited, and its focus is on advancing basic science, not developing new medicines.
Lowering prescription drug costs for patients is a critical issue that must be addressed. After all, the greatest medical discovery is not helpful if patients cannot access it. This is all too often the experience of patients whose rising deductibles and out-of-pocket costs are putting medicines out of reach.
We can lower drug costs for patients without blowing up the entire system. Let’s focus on practical affordability reforms, such as capping out-of-pocket costs, lowering patient cost sharing, ensuring predictable monthly out-of-pocket costs, sharing negotiated savings with patients, enhancing competition from generic medicines, and promoting value-based contracts.
It is vital that we bridge the gap between what is happening in biopharmaceutical labs across the country and the debate that is happening is Washington. Too much is at stake for patients to allow health care politics to steer us off course.
Stephen J. Ubl is the president and CEO of PhRMA, the trade association representing the country’s leading biopharmaceutical researchers and biotechnology companies.
I have the advantage to have dual citizenship. My parents and I have top of the line employee sponsored insurance that costs me 10% of my raw salary, and prices are still higher in the U.S.
I hate to hear pharma companies whine about prices when they clearly make a profit selling the same drugs at lower prices in other developed countries.
I’m all about capping 1000% profits.
I think it’s a big ethical oops that STAT did not mention this guy’s position as a major sponsor of the STAT newsletters.
Off topic – I never hear about Medicaid in these debates. Isn’t Medicaid a backstop to ensure that everyone can afford treatment? Why doesn’t that ensure all Americans get care?
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