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.
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