After months of wrangling, Democratic lawmakers have agreed on a drug pricing bill. The House could vote on it within days.
If it becomes law, we’re going to see some unfortunate consequences that legislators can’t possibly have intended. By ignoring what they may have thought were minor details, they’re about to distort the entire drug-development ecosystem to society’s detriment.
In an attempt to save the government money, the proposal allows Medicare to impose price controls on a range of prescription medicines after varying lengths of time on the market. Those price controls, and the complex rules and caveats surrounding them, will deter investors like me from backing certain research projects, skewing the kinds of drugs patients will eventually have access to.
Let’s look at some of the adverse consequences.
First, the drug pricing bill would ironically encourage drug companies to concentrate on complex, large molecule “biologic” drugs — which are typically injected — instead of small-molecule drugs typically taken in pill form that are easier and cheaper to make and administer. That’s because the legislation would make small-molecule drugs eligible for price controls nine years after they launch, whereas biologics would be shielded from price controls for 13 years.
If lawmakers must skew the playing field one way or the other, they should encourage the development of drugs that are easier for patients to take and that tend to go generic more quickly and efficiently. Instead, Congress is poised to incentivize companies to develop biologics that are, on average, more expensive to produce and more difficult for patients to take — and to take as prescribed — often requiring physicians to administer them, adding to costs.
In so doing, the proposed drug pricing bill would also undermine a part of President Biden’s agenda: curing cancer. Numerous cancers have intracellular targets — proteins inside cancer cells — that can be “drugged” only with small molecules that are able to get into cells, not large biologic molecules that can’t. Championing a cancer moonshot while discouraging research into small molecules is like saying you want to go to the moon while discouraging the use of rockets.
Second, the price-control scheme would discourage companies from seeking new uses for existing drugs.
These days, companies continue to discover new diseases they can treat even a decade after a drug has launched, because they still have time to turn a profit. For example, after the Food and Drug Administration approved the first SGLT2 inhibitor to treat diabetes in 2013, companies saw signals by 2016 that these drugs might also treat heart failure. After running a big, expensive, risky trial, AstraZeneca sought FDA approval for Farxiga (dapagliflozin) to treat heart failure — and received that approval in 2020, after which the company still had 10 years of market exclusivity during which to profit from that investment without generic competition.
If exclusivity had been limited to nine years, the price of AstraZeneca’s drug would be scheduled for mandatory control in 2023. That means that back in 2016, when the AstraZeneca would be considering whether to invest in the heart failure trial, it would see that it would have less than three years between an approval in 2020 and price controls in 2023 during which to generate a return from its investment, and might very well have decided not to make that investment. Considering that SGLT2 inhibitors save lives and avert expensive hospitalizations, society would have borne that loss.
The reward for developing effective small-molecule drugs should be kept appropriately long, around 13 to 14 years.
Third, the drug pricing bill functionally does away with an important incentive to run pediatric clinical trials, which are essential to learn about the effectiveness and appropriate dosage of new medicines for children.
Existing law gives drug companies a six-month pediatric extension on their exclusivity period to encourage trials in kids. The new law would send drug development back to an era when scientists, doctors, and parents struggled to get data on how to treat children with adult drugs.
I hope lawmakers are still thinking through the potential consequences of their proposal — and remain open to revisions before it goes to the floor. The ultimate victims of all the unintended consequences of the current proposal will be all of us as future patients.
Peter Kolchinsky is a founder and managing partner at RA Capital Management and author of “The Great American Drug Deal” (Evelexa Press, 2020).
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