Incubate Letter on Reconciliation Drug Pricing Provisions

Read Incubate's letter to the US Senate on their recent drug price provisions in the Reconciliation package


As the voice for life science venture capital in the United States, Incubate appreciates the ongoing opportunity to work with you on healthcare policy. At a time when biopharmaceutical advancements are enabling us to cure disease, fight pandemics and even extend longevity, it is critical that policymakers enact legislation that not only supports the U.S.’ robust ecosystem for research and development that makes life-changing medicines a reality, but ensures that all Americans have equitable access to them.

That is why we are so disheartened to see the Senate considering a package that ignores those priorities and instead pursues political headlines at the cost of future therapies for patients.  

As those enabling the early-stage life sciences ecosystem, we have told Congress and the Administration time and again that any variation on price controls, even those masquerading as Medicare “negotiations,” will chill our investments.[1],[2]We said this when reference pricing was proposed. We said this when H.R. 3 was passed in the House. And we are saying it again to you now.

The July 2022 legislation will have the following consequences:

  1. In a year when the biotechnology sector is down more than 50%, it will inject additional uncertainty to our investments, driving up the cost of capital and further weakening the marketplace.[3]
  • It will have government policy, not science, drive investment decisions by prioritizing and rewarding biologic products over small molecule products—despite a revitalization of small molecule research.
  • Lowered future returns will encourage a de-risking of portfolios meaning high-risk new modalities and platforms – as mRNA was considered a decade ago – are the most likely to be shelved. It is important to remember that the large financial successes pay for the 9 in 10 drugs that do not make it to market.
  • It will lead to fewer lifesaving drugs for patients. This was acknowledged by the Congressional Budget Office, though Incubate’s own research demonstrates their assumptions to be low.[4]  
  • It will disincentivize follow-on and incremental innovation. As proposed the legislation removes market incentives to identify additional uses for existing products, which entirely misses the role each product plays as a stepping-stone to future innovation—an especially important factor for pediatric and rare disease treatment development.

Moreover, the proposed legislation misses a major opportunity to finally provide meaningful out-of-pocket (OOP) relief to Medicare beneficiaries at the pharmacy counter. While the bill’s $2,000 OOP cap in Part D will certainly help some of our country’s seniors, the overall impact is quite small and will not even be felt until 2025.

The bill also retains the current Part D coinsurance structure, and removes the $35 copay cap on insulins seen in prior versions. Further, the bill blocks implementation of the rebate rule, which would have required middlemen to pass their savings on directly to patients resulting in billions of dollars in OOP savings. In fact, there are no provisions in the proposed text that would hold insurers, pharmacy benefit managers (PBMs), or middlemen accountable for their role in increasing costs for patients.

We have long urged Congress to take action to improve patient access to new drugs – many of which we have had a hand in developing—and have been pleased to see some states enact helpful laws (e.g., legislation that shines a light on the business practices of PBMs, like what was recently enacted in West Virginia). It is disappointing that the Senate is refusing to pursue commonsense reforms that lower patient OOP costs for medicines, address skyrocketing deductibles, and ensure patients can realize the savings accrued by PBMs and other middlemen.

Recent failures in the areas of Alzheimer’s disease, ALS, and rare cancers should be a reminder that we need more investment and effort for the next generation of medicines, not less. Pursuing this proposal – while good politics – does little to address our broken healthcare system, disincentivizes future innovation and shelves bipartisan efforts to help our country succeed for decades to come.

As always, we welcome the opportunity to detail these views further and share our body of policy research with you and your office.


John Stanford

Incubate Executive Director

[1] Most recently Incubate brought leading venture capitalists to Washington to present on this issue. More information at

[2] Incubate Policy Lab, November 11, 2021. The Impact Of Price Controls On Investment Into Small Biotech Innovation. Available at:

[3] As measured by the XBI ETF (January 3, 2022 @ $115.44 and June 15, 2022 @ 65.68, a 57% decline).

[4] Incubate Policy Lab, October 20, 2021. Drug Price Controls In The U.S.: A Roundtable Discussion With Experts. Available at: