In rare political foray, top biotech investors urge Congress to reject drug pricing bill
Thirteen of the top biotech venture capitalists in the country wrote a letter last week warning lawmakers that if Congress passes a drug pricing bill House Speaker Nancy Pelosi has put before lawmakers, they won’t be able to invest in biomedical research at their current rate, and patients will suffer.
“If policies such as those included within H.R. 3, the Lower Drug Costs Now Act, are passed, our ability to continue to invest in future biomedical innovation will be severely constrained, thus crushing the hopes of millions of patient waiting for the next breakthroughs to treat or cure their cancers, rare genetic diseases, Alzheimer’s, or other serious and life-threatening conditions,” they wrote in a letter addressed to the highest-ranking Democrats and Republicans in the House and Senate and acquired by Endpoints News.
The list of signatories includes Arch Venture Partners’ Robert Nelsen, Bay City Capital’s David Beier, Flagship Pioneering’s Doug Cole, RA Capital Management’s Peter Kolchinsky and Pappas Capital’s Arthur Pappas. They write they have over $20 billion invested in private and public biopharmaceutical companies.
The investors join the larger pharma companies in expressing alarm about the price controls in Pelosi’s bill. Pfizer is urging voters to “Tell Congress: Reject the Dangerous Drug Pricing Bill.”
While the large pharma companies have long peddled in Washington through the lobbying group PhRMA and have amped spending to record levels as drug pricing reform has gained traction, biotech venture capitalists have largely been more reluctant to enter the political fray. Increasingly, though, the debate around drug pricing reform and what it might mean for R&D has centered around the smaller biotechs these VC funds keep afloat.
Last week, STAT ran a piece quoting tiny biotechs as fearing a “nuclear winter” if the Nancy Pelosi-backed bill passed. In October, Bobby Dubois, the CSO of the industry-backed National Pharmaceutical Council told Endpoints that he couldn’t be sure that a fall in revenue for big pharma would lead to cuts to R&D spending but that it was very likely that such a bill would cut off dollars from smaller biotechs.
Biotechs’ high startup costs and attrition rate, the theory goes, make them dependent on huge potential payouts. Without those, investments would dry up.
The bill would also likely derail the biotech IPO market, which is how venture capitalists have earned much of their money in biopharma in recent years.
Unveiled in September, the Democratic bill — which contains elements Republicans have backed but has little chance of passing the Senate — would tether the price of the nation’s 250 most expensive drugs to an international price index and all-but-force companies to negotiate the final figure with the federal government. An early Congressional Budget Office analysis estimated the bill would reduce federal spending on Medicare Part D by $345 billion between 2023 and 2029 but also lead to between 8 and 15 fewer drugs being brought to market over the next 10 years, although the CBO said the effect on innovation was difficult to quantify.
In the letter, the VCs argued such a system would be “granting the U.S. government essentially unchecked authority” to set prices and pin those prices to countries that “systematically undervalue” medical breakthroughs.
“Biotech investment already is a high-risk enterprise…” they wrote. “If, after we invest hundreds of millions of dollars over a decade or more to achieve such success, the government can impose an artificially low price on the few new drugs that make it to market, our robust biotech investment ecosystem will become unsustainable.”
The disagreement between the VCs and Democratic and some Republican lawmakers is both around whether the cuts will affect innovation and the value of some of that innovation. The VCs described the therapies they back as “miracle drugs, with the ability not just to treat, but to actually cure, so many genetically-based diseases and other serious conditions.”
In past pushes for drug pricing reform, advocates have mostly said that that rhetoric is overstated and pricing controls will leave R&D spending mostly untouched. But a few Democrats, including Florida Representative Darren Soto and California Representative Anna Eshoo, now argue an uptick in access is worth losing a few drugs.
“Three hundred forty-five billion dollars in savings versus the cost of eight to 15 fewer drugs over 10 years,” Soto said at a recent hearing before the House Energy and Commerce Committee, according to STAT. “I frankly think it’s worth it.”