From Bad to Worse on Drug Price Controls
The life sciences venture capital community has long warned against the adverse consequences government price controls for prescription drugs would...
The life sciences venture capital community has long warned against the adverse consequences government price controls for prescription drugs would have on America’s ability to continue leading the world in scientific discovery. And since the Inflation Reduction Act—which implements a faulty price-setting scheme in Medicare—was passed last year, patient advocates have continued to raise the alarm. They know better than anyone that the research and development process that gets new treatments and cures into patients’ hands is a long game and the source of hope to thousands suffering from diseases with no treatment or cure.
Rather than listen to those constituents and attempt to alleviate their concerns, some lawmakers are doubling down on the misguided idea that they can dramatically reduce incentives to innovate and still post gains in health outcomes. Almost two dozen lawmakers have co-sponsored the Strengthening Medicare and Reducing Taxpayer (SMART) Prices Act, which would sharply increase the number of drugs subject to price controls and further reduce the period of time new products are on the market before they’re subject to the price setting process. The legislation closely mirrors a restrictive proposal in the Biden Administration’s fiscal year 2024 budget request.
Proponents claim these proposals would “strengthen” the Medicare program. The irony of the bill’s title is that it could, in fact, weaken Medicare. There are millions of beneficiaries who rely on medical innovation to improve their chances of beating the myriad diseases that disproportionately affect older Americans, such as cancer, heart disease, and Alzheimer’s, to name a few. When there’s little opportunity to recoup the staggering amount of investment it takes to bring a new treatment to market, new treatments will simply cease to exist.
It is also hard to reconcile the Biden Administration’s recently re-launched Cancer Moonshot initiative with these proposals. Last year, the President inspired America by calling for a 50 percent reduction in cancer deaths over the next 25 years. At that time, and since, he has acknowledged the important role that new treatments will play in achieving this goal. But, in signing the IRA and further restricting incentives to innovate, he seems to be talking the talk, but not walking the walk. These concerns are not hypothetical. We’ve already seen one drug company discontinue clinical trials on a blood cancer treatment because the IRA’s price controls would make further investment unwise.
Similarly, a survey of biotech firms and venture capital investors found that one-third expect the IRA to bring about major changes in their business models. For one, we will be less likely to see pharmaceutical companies test existing products for their viability in treating patients with different diseases, because there won’t be enough time left on the price control clock to get a return on that additional investment. The same survey found that drugmakers will be more likely to pour resources into disease treatments affecting larger populations that can generate revenues more quickly. This is bad news for patients with rare diseases where we’ve been making remarkable progress in recent years due to the foresight of Congress to incentivize investment in this area.
Policymakers simply can’t have it both ways, counting on the power of biopharmaceutical development to conquer disease and then erecting insurmountable barriers that prevent it from doing so.