Pelosi drug pric­ing bill promis­es sav­ings, but could gag R&D — CBO analy­sis

The De­moc­rats’ drug pric­ing bill — un­veiled by Speak­er Nan­cy Pelosi last month — could save Medicare spend­ing by $345 bil­lion over a sev­en-year pe­ri­od, a new analy­sis sug­gests. But the ven­omous cli­mate of im­peach­ment pro­ceed­ings and the in­ten­si­fy­ing dis­cord be­tween the De­mo­c­rat-con­trolled House and Re­pub­li­can-ma­jor­i­ty Sen­ate por­tends the bill will un­like­ly ever be­come law.

Tech­ni­cal­ly, both sides of the aisle agree drug prices in the Unit­ed States need some low­er­ing. The De­moc­rats’ bill, H.R.3 – Low­er Drug Costs Now Act of 2019, is en­gi­neered to em­pow­er the HHS to ne­go­ti­ate prices for the 125 most ex­pen­sive pre­scrip­tion drugs with­out at least two com­peti­tors — the Trump ad­min­is­tra­tion has al­ready backed such a mea­sure for the Vet­er­ans As­so­ci­a­tion. Un­der the bill, prices for this cat­e­go­ry of med­i­cines are not in­tend­ed to ex­ceed 120% of the av­er­age price in cer­tain oth­er coun­tries (Aus­tralia, Cana­da, France, Ger­many and the Unit­ed King­dom), akin to a pro­pos­al float­ed by Trump ear­li­er this year, which sug­gest­ed prices be pegged against what oth­er na­tions were pay­ing as part of an “in­ter­na­tion­al pric­ing in­dex”.

Apart from un­der­stand­ably elic­it­ing the ire of the bio­phar­ma in­dus­try — which holds the crown for the least fa­vored sec­tor by Amer­i­cans, falling be­hind the fed­er­al gov­ern­ment it­self — the bill has al­so met with crit­i­cism from mem­bers of the GOP. The dis­sent — shared by both fac­tions — stems from the be­lief that the ini­tia­tive would in­evitably chill in­vest­ment in phar­ma­ceu­ti­cal re­search and sti­fle in­no­va­tion.

In the fresh, but pre­lim­i­nary, analy­sis pub­lished on Fri­day by the Con­gres­sion­al Bud­get Of­fice (CBO), the bill would not on­ly cut fed­er­al di­rect spend­ing for Medicare by $345 bil­lion over the 2023-2029 pe­ri­od but would change the com­plex­ion of the drug mar­ket by chang­ing in­cen­tives that man­u­fac­tur­ers cur­rent­ly en­joy.

“A man­u­fac­tur­er that was dis­sat­is­fied with a ne­go­ti­a­tion could pull a drug out of the U.S. mar­ket en­tire­ly, though CBO ex­pects that would be un­like­ly for drugs al­ready be­ing sold in the Unit­ed States. Man­u­fac­tur­ers would ini­tial­ly set list prices of some new drugs in the U.S. high­er than un­der ex­ist­ing law, al­though the net prices paid by con­sumers over time could be low­er in many such cas­es,” the re­port said.

The CBO al­so cau­tioned that the bill could al­so mo­ti­vate man­u­fac­tur­ers to spike drug prices in coun­tries out­side the Unit­ed States to make up for lost rev­enue, or not sell cer­tain med­i­cines at all out­side the Unit­ed States to elim­i­nate ref­er­ence prices for US ne­go­ti­a­tions.

PhRMA, a pow­er­ful phar­ma lob­by group, took is­sue with this claim. “This re­flects a lack of un­der­stand­ing of for­eign pric­ing sys­tems, which have laws and reg­u­la­tions that pro­hib­it man­u­fac­tur­ers from uni­lat­er­al­ly set­ting prod­uct prices and/or in­creas­ing the prices of prod­ucts,” a spokesper­son not­ed in an email to End­points News.

The CBO’s analy­sis al­so mir­rored some of the con­cerns ex­pressed by Re­pub­li­cans. Al­though in the short term low­er prices will en­hance ac­cess to med­i­cines and im­prove health — over the longer term,  di­min­ished spend­ing on re­search and de­vel­op­ment will cul­mi­nate in the in­tro­duc­tion of few­er new drugs, the re­port pre­dict­ed.

Al­though the CBO’s analy­sis of the bill is not com­plete, “its pre­lim­i­nary es­ti­mate is that a re­duc­tion in rev­enues of $0.5 tril­lion to $1 tril­lion would lead to a re­duc­tion of ap­prox­i­mate­ly 8 to 15 new drugs com­ing to mar­ket over the next 10 years. The over­all ef­fect on the health of fam­i­lies in the Unit­ed States that would stem from in­creased use of pre­scrip­tion drugs but de­creased avail­abil­i­ty of new drugs is un­clear.”

These cal­cu­la­tions were based on the premise that the FDA ap­proves, on av­er­age, about 30 new drugs an­nu­al­ly. In 2018, the US agency cleared 59 drugs; in 2017, it ap­proved 46; and in 2016 the num­ber was 22. So far this year, the reg­u­la­tor has green-light­ed 30.

“It takes an av­er­age of 10-12 years to de­vel­op a new med­i­cine so the biggest im­pact on in­no­va­tion will oc­cur out­side of the ten-year bud­get win­dow,” the PhRMA spokesper­son added.

Sep­a­rate­ly, an analy­sis by the CMS sug­gest­ed that the bill could cur­tail to­tal US spend­ing on health­care by about $480 bil­lion over a decade — sav­ing Amer­i­can house­holds rough­ly $158 bil­lion in low­er pre­mi­ums and small­er out-of-pock­et costs.

Source: CMS, 2019

Click on the im­age to see the full-sized ver­sion

Ear­li­er this month, Trump claimed that the phar­ma­ceu­ti­cal in­dus­try was be­hind the im­peach­ment in­quiry from House De­moc­rats, with­out of­fer­ing any ev­i­dence to sup­port his as­ser­tion.

“Does Trump’s al­lu­sion to Big Phar­ma’s role as the bankroller of the im­peach­ment “hoax” get con­demned by the oth­er side, there­by de­fend­ing phar­ma? That prob­a­bly won’t hap­pen, but we are be­gin­ning to think the util­i­ty of phar­ma as a po­lit­i­cal punch­ing bag may be start­ing to wear thin giv­en the ab­sur­di­ty of this lat­est al­le­ga­tion,” Baird’s Bri­an Sko­r­ney wrote in a note on Oc­to­ber 4.

So­cial im­age: Nan­cy Pelosi, AP Im­ages

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