Drug Pricing Bill Will Stop Innovative New Medicines, California Trade Groups Say

Published on


November 1, 2019


Up to 88 percent fewer new drug approvals projected in study commissioned by Biocom and California Life Sciences Association.

Drug price control legislation now in Congress would reduce the supply of new drugs from California’s large life science sector by as much as 88 percent, as well as cutting 80,000 R&D jobs nationwide, the state’s two life science trade groups said Thursday.

Those conclusions were contained in a report commissioned by Biocom and the California Life Sciences Association. The study was performed by Vital Transformation, a Belgian health care consulting company, about the potential effects of the bill, H.R. 3.

Supported by House Speaker Nancy Pelosi and other top Democrats, the bill is intended to rein in soaring drug prices, especially for new drugs. While these drugs can improve or even save lives, consumer groups say the prices are too high and bring in excess profits to the pharmaceutical industry.

Among its provisions, the bill requires the U.S. Centers for Medicare & Medicaid Services to negotiate maximum prices for up to 250 of the most costly drugs it buys. Those prices are tied to the average drug prices in selected foreign countries.

The bill specifically names insulin, which on average nearly doubled in price from 2012 to 2016, according to the Health Care Cost Institute. The House of Representatives is expected to consider the bill at the end of November. It faces an uphill struggle in the Republican-led Senate.

The Vital Transformation study focused on 25 smaller California life science companies that received FDA marketing approval from 2009 to 2019. It concluded that if H.R. 3 had been in effect, only three drugs from those companies would have come to market.

That conclusion was reached by statistical modeling of what these 25 companies would likely have received in investment, said Jennifer Nieto, a vice president with the California Life Sciences Association. Lowering the potential return on investment causes investors to be more conservative in where they put their money, she said.

Biocom’s Laure Fabrega , director of federal policy and government affairs, said that means “a lot of the more risky R&D projects are going to be put on the shelf. “Seventy percent of the R&D pipeline comes from small companies.”

San Diego County would be severely hurt if this happens, she said, because its life science drug sector is dominated by small and emerging companies.

Many of these small companies have a goal of developing products to a certain point, and then getting acquired or forming a partnership with a larger company, said Jimmy Jackson, Biocom’s chief policy officer. That depends on the expected return from their product.

Jamie Court, president of Consumer Watchdog, said allowing the U.S. government to negotiate uniform prices for the drugs its agencies buy “is absolutely the most sensible and common-sense solution.” Other countries buy in bulk that way and save, he said.

While the group hasn’t taken a stand on H.R. 3, Court said it supports the concept.

The life science companies won’t be hurt as much as the report claims, said Geoffrey Joyce, director of health policy at the USC Schaeffer Center for Health Policy and Economics. Likewise, consumer advocates are likely to get less than expected.

“Don’t believe the numbers,” Joyce said. “The numbers are a little ridiculous. But the direction of the effect is not wrong. Any time you try and lower prices to manufacturers, and that’s what you’re basically doing, you’re creating a disincentive. The payoff is less for developing a new drug.”

So while existing drugs might sell for less than they otherwise would have, the supply of new drugs will be curtailed, he said.

“If you told Apple it could charge only $600 max for your iPhone, don’t you think it would have changed the pace of innovation, the features they add?” Joyce said. “It’s just common sense.”

And tying prices to those in foreign countries is likely to backfire, Joyce said. Drug companies will raise the prices they charge in Europe.

“And the second thing is that if the drug is not widely used in those countries, you don’t have a benchmark price,” Joyce said. “Then they’re going to get 85 percent of the average manufacturer’s price and that can be gamed.”

“Today, almost half of all pharmaceutical manufacturers’ profits come from the U. S. market,” he said. “So that’s the Holy Grail. And they want to make sure whatever they’re doing overseas is not going to adversely affect this market.”

The bill’s text can be found at http://j.mp/healthhr3. The study can be found at j.mp/drugpricestudy

Consumer Watchdog
Consumer Watchdoghttps://consumerwatchdog.org
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