Pfizer’s disclosure last week that it may reverse plans to in-shore manufacturing facilities and science jobs to the United States is just the tip of the iceberg of the problems we’ll face if President Trump implements his executive order to implement foreign reference pricing to determine drug prices under Medicare.
The order announced July 24 is the long-threatened nuclear option against biopharmaceutical companies, ending market-based pricing for drugs in America. The president’s plan would limit reimbursement for physician-administered, injectable drugs for seniors in the middle of a pandemic that’s ravaging America’s elderly. The order pegs what our government would pay for drugs to amounts paid by a group of foreign countries in the Organization for Economic Cooperation and Development.
Doing so will stall the capital flowing to small biotechs working to bring the COVID-19 pandemic to an end. In fact, it already has. Since word of the president’s ill-timed mandate circulated among investors, the market value of companies included in the NASDAQ Biotech Index fell by $80 billion – a 7 percent drop.
The timing couldn’t be worse for our scientists’ efforts to deploy innovation to end the coronavirus nightmare. In just seven months, the biopharma industry has filled the COVID-19 drug development pipeline with an eye-popping 678 drugs, including 175 vaccine candidates. U.S. companies have originated more potential medicines to fight coronavirus than the rest of the world combined.
Back in the 1960s, Maurice Hilleman set the record for speed on the mumps vaccine, going from viral specimen to licensed vaccine in four years. Today’s cutting-edge biotechnology platforms have raised credible hopes of smashing that record and delivering an approved vaccine in 12 to 18 months.
Small companies are driving more than 70 percent of drug candidates through the COVID-19 pipeline. The progress of once-obscure biotechs like Moderna and Novavax is now dinner-table conversation in American households.
Only 12 percent of small biotechs in this space have received any government assistance. Most depend entirely on robust capital markets to sustain their work. Without motivated investors, few medicines in the pipeline will ever cross the safety/efficacy finish line.
The president’s own Council of Economic Advisors predicted that foreign reference pricing will lead to 100 fewer new medicines over the next decade, due to reductions in R&D spending by private investors.
President Trump is correct when he says that the United States shoulders a disproportionate burden of supporting global biomedical innovation. Other nations often impose strict price controls on new drugs as a short-term, cost-cutting measure, regardless of the value that medical breakthroughs provide to patients and the broader health care system.
But there is a profound tradeoff. Due to their price controls, foreign countries have less access to the newest, most cutting-edge medicines, which raises both the human and financial cost of disease. Nearly 90 percent of all new medicines launched since 2011 are available in the United States, compared to just 50 percent in France, 48 percent in Switzerland and 46 percent in Canada.
Studies routinely show that newer medicines save the system money due to fewer hospital stays, fewer days of work lost and lower rates of mortality. In Medicare specifically, novel medicines have been shown to reduce physician and hospital spending by six times any increase in drug spending.
The price control tradeoff – less innovation for lower wholesale prices – has been well studied. European-based firms once led the U.S. in drug R&D by 24 percent. Following the imposition of price controls, these companies had fallen behind their American counterparts by 40 percent by 2015. Had foreign price controls been adopted here from 1986-2004, economists estimate that 117 fewer medicines would have been produced for worldwide use.
Our drug innovation ecosystem gives our citizens the fastest access to new medicines in the world. Now is the most inopportune time in American history to experiment with failed foreign pricing systems that systematically undervalue U.S. innovation and patient care.
President Trump issued four recent executive orders on drug pricing, but none address the real crisis in American health care: insurers’ shifting of costs to patients in the form of ever-higher deductibles and co-pays. This reality drives the access challenges that have left vulnerable communities with higher rates of untreated illness and more lethal outcomes when infected with the coronavirus.
Congress has already zeroed out co-pays for a COVID vaccine; it should follow through and do the same for therapeutics. Sadly, the president’s order is focused on lowering the cost of drugs paid by the government, not patients.
Right now, the American people want our leaders to support industry efforts to innovate medicines that will end the pandemic and get America back to school and back to work – not blow up our world-leading ecosystem for financing new medical breakthroughs.
Three months before the election, if President Trump wants to reassure voters on drug prices, he will support zero co-pays for all COVID therapeutics. And if he wants to reassure the country that our economy will bounce back strong, he will reconsider his price control fiat that threatens the speedy innovation upon which our recovery depends.