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.

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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.

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  • Just got home from HealthWatchUSA’s 13th annual conference. One of the most powerful speakers was a woman who spoke about drug costs around the world and within the US, and then she made the presentation personal, pulling back the curtain on her husband and two children’s healthcare problems and the family’s drug costs. In addition, she analyzed Facebook groups to learn the impact of drug prices on families from coast to coast. I found myself fighting back tears and wondering what good are drugs and R&D when prices destroy families.

  • Steve Ubl’s argument overlooks key aspects of the problem. Yes, drug companies will spend about $180 billion this year on R&D, but 95% of our prescriptions come from generics. What is the point of spending so much if it touches so few? Meanwhile, our health outcomes – such as life expectancy – keep deteriorating. The science behind many new drugs is dazzling and their quality is unprecedented but, for most Americans, the benefits of pharmaceutical innovation have become elusive. What patients (a.k.a. voters) see is that new drugs are unaffordable and the cost of old drugs keeps rising inexplicably. These costs are in turn passed onto most Americans through insurance markets, resulting in unaffordable premiums and copays. To make matters worse, the industry — by most financial measures — does rather well and thus has little incentive to change, preferring to rely on its feared lobbying power to defend the status quo. While we talk past each other, the problem festers. Instead of relying on its “tired talking points” — e.g., “if one penny disappears from pharma profit margins, American innovation will grind to a halt” — the pharma industry and Mr. Ubl must seize the initiative and come up with new thinking that can break the deadlock. This is the leaders’ responsibility. If they are not up to it, they will have to eventually swallow whatever proposal public outrage pushes through Congress, and they will only have themselves to blame for it.

    Useful links:
    https://info.evaluate.com/rs/607-YGS-364/images/EvaluatePharma_World_Preview_2019.pdf

    https://www.msn.com/en-us/news/us/q-a-how-the-future-of-medicine-looks-to-the-fda-s-top-drug-regulator/ar-AAGUnnb?ocid=00000000

    https://jamanetwork.com/journals/jama/article-abstract/2674671

    https://www.healthaffairs.org/do/10.1377/hblog20190228.636555/full/

    https://www.hhs.gov/about/leadership/secretary/speeches/2018-speeches/remarks-on-drug-pricing-blueprint.html

  • Sorry, I don’t buy that comment either. This is all Pharma supported BS to try to protect their profits at the expense of the American consumer.

  • There is a growing body of research that shows that US pricing of drugs generates high levels of return, in some cases more revenue than is needed for global R&D spending of certain companies. Coupled with the assumption that no pharma company is taking an actual loss on sales in other countries, there is margin for cost reductions in the US while continuing to support R&D, US shareholders and US employees. The US healthcare system needs to be able to afford access to medicines. High insured patient out of pocket costs is a symptom of the problem, not the problem. New medicines mean nothing if we can’t afford them.

  • The cost of getting an FDA approval is increasing exponentially every year without increasing safety. The price of an innovative drug at the pharmacy is directly related to the R&D necessary to bring it to market (https://www.statnews.com/2018/10/01/changing-1962-law-slash-drug-prices/). Only 2-3 drugs out of 10 recover these costs. The only way to significantly lower drug prices without slashing innovation is to lower the regulatory creep that is driving up drug prices.

    • It is indeed opinion, Pamela, and is labeled as such — First Opinion — at the very top of the article.

      Pat Skerrett
      STAT

  • Such a powerful and eye-opening article, Mr. Ubl. Thanks for bringing this legislation to the forefront. I will share this through my network, as well. I handle public relations for a number of life sciences tech providers like Veeva Systems and Vlocity so I can appreciate this piece. Great work!

  • Boo hoo. PhRMA is one of the biggest special interest lobbyist groups in all of DC. I don’t believe anything they say.

    Maybe it is time for the rest of the world to pay for their fair share of innovation. The US and its citizens cannot be expected to pay for the cost of all innovation while the rest of the world gets to reap all of the benefits and fix their costs. Maybe the world needs to have a consortium on leveling the playing field for paying for innovation. The costs of drugs are literally killing Americans.

  • That’s funny! You have a sure future as a comedian, you know, when pharma industry will be wiped out by these evil socialist policies

  • You are pushing a narrative that we simply can’t do anything about our insane healthcare costs because poor pharma companies need the money that we are paying in order to invent new drugs. This is false. Pharma companies spend way more on marketing their products than the do on R&D (https://www.washingtonpost.com/news/wonk/wp/2015/02/11/big-pharmaceutical-companies-are-spending-far-more-on-marketing-than-research/?utm_term=.2b2a6d4c9cbc). On top of that, TAX PAYERS that have already paid for the development of basically every major new drug that has come to market in the last decade (http://www.pnas.org/content/115/10/2329). By paying taxes to develop new drugs and then turning around and paying for the new drugs that our tax dollars developed, we are being scammed. And you know it. You are just a lobbyist trying to convince the broader public that you are the “good guys” but you sit there and rake in 2.8 million dollars a year while the rest of us struggle to afford life-saving drugs because your pals jacked up the price by 5000%. Go ahead and tell it to your senators and congressman that your organization has bought. In the mean time, the rest of the country is working to elect people who will say no to your rent-seeking bullshit.

    • Marketing is an important component of any consumer-facing business. Marketing raises revenues by more than it costs- that is why companies do it. This additional revenue from marketing helps fund R&D.

      That paper that you linked to just says that publicly funded labs studied drug targets. The vast majority of the cost of drug development comes from private capital- it is not the case that Universities dig up little gems and just give them away to pigs in top-hats.

    • Hey pharmadevil’s advocate – your reply makes no sense. You sound like someone paid by big pharma to make bs excuses for their “profit before lives” business model. Can you provide any evidence or references to back up what you’re saying? Or do you just assume that people are so stupid that they will take your word for it that pharma companies are the good guys and the victims of progressives?

    • @Michael
      The evidence for my claim is the paper that you posted. Did you read it?

      If you are curious (and I doubt that you are), you can find lots of info about the costs of drug development in Tufts CSDD’s R&D cost study in the Journal of Health Economics.

      Lastly, here is an account from the NSF on federal R&D spending. You’ll notice that government spending contributes a tiny fraction (0.2%) of the total pharma R&D spending, and is much less than the government spends on, say, manufacturing R&D.
      https://www.nsf.gov/statistics/2018/nsb20181/assets/1038/tables/tt04-09.pdf

      I am not a paid advocate, but I work in the industry as a scientist. I think that trying to cure diseases is a great career objective and a noble way to make a living- that is why I chose to pursue it. It would be a shame for ignorance amplified by unbridled emotionality and greed to motivate political capture of this enterprise.

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