Prescription Drug Bill Overlooks Cost of Foregone Innovation
Last month, the Food and Drug Administration approved a breakthrough new treatment for cystic fibrosis, which affects about 30,000 Americans. The Cystic Fibrosis Foundation calls the new drug, Trikafta, "the single greatest therapeutic advancement in the history of CF." It can turn the devastating disease into a manageable chronic condition like diabetes. CF patients who were previously winded by a walk down the hall are now running five-kilometer races on this drug. Traditionally dead by about 40, they can now plan for retirement.
Roughly 30 million other Americans afflicted by rare diseases are waiting for their Trikafta moment. Recent drug development history suggests their blind hope should give way to cautious optimism. Since the Orphan Drug Act passed in 1983, the FDA has approved more than 770 new medications, and there's 560 more in development.
However, prescription drug legislation soon to be voted on in the House of Representatives threatens the decades-long research pipeline responsible for these lifesaving cures and life-altering treatments. Speaker Nancy Pelosi's "Lower Drug Costs Now Act" would create de facto price controls on prescription drugs by tying their costs to those in countries where governments set drug prices.
According to a recent analysis by the nonpartisan Congressional Budget Office, these prescription drug price controls would reduce drugmakers' revenues by as much as $1 trillion over the next decade, resulting in 15 fewer drugs developed over that timeframe. (The FDA approves about 30 new drugs annually.) Manufacturers that refuse the government's price diktats would receive a fine of between 65 and 95 percent of annual sales. (That's revenue, not just profit.)
Keeping the drug development pathway clear for breakthrough drugs like Trikafta should be policymakers' North Star. Developing a new cure or treatment is exceedingly difficult, with only a 10 percent success rate. More than 120 potential treatments for Alzheimer's disease, for instance, have failed over the past 16 years. Trikofta is the exception, not the rule; it has to pay for past and future failures.
While commentators like to portray drugmakers as behemoths, many are small and haven't received any revenue yet. Investors won't fund their research efforts if a government index caps their potential returns. Pelosi's bill claims that the National Institute of Health could pick up the R&D slack. But state science institutes have never come close to the output of private industry.
Instead of disputing the CBO's conclusion about fewer cures, Democratic lawmakers such as Rep. Darren Soto (D-FL) are leaning into it, arguing that this tradeoff is "worth it." According to STAT News, "Democratic lawmakers in recent weeks have begun to advance an argument long seen as something of a third rail in U.S. politics: that slightly less biomedical innovation might be worth a dramatic reduction in drug prices."
Tell that to Erica Dean from North Carolina. Her daughter Sophie has cystic fibrosis and has waited her entire 13 years of life for medicine like Trikafta to come along.
It's easy for those whose lives or livelihoods aren't threatened by a rare disease — which may not even have a treatment yet, much less a cure — to call for a sacrifice in innovation. Their utilitarian approach to public policymaking overlooks the individual rights of the most vulnerable people in society.
What proponents of this bill don't mention is that other countries partially achieve their drug savings by excluding the newest and best treatments from their populations. According to the Galen Institute, just 62% of modern medicines introduced between 2011 and 2018 are available in Germany, 60% in the U.K., 50% in Japan, and 48% in France. These countries also freeload off U.S. research and development, which is responsible for most drug breakthroughs. Americans subsidize the latest drug treatments for the rest of the world.
The kicker: The CBO expects that the legislation would actually lead to higher costs for new drugs because, to recoup revenues, manufacturers would be forced to charge more for new cures that haven't reached socialized markets and received a reference price. Talk about unintended consequences.
In their quest to bring down drug costs, policymakers must not ignore kids like Sophie. Nor should they ignore the opportunity cost of blocking the next rare disease breakthrough. Or, as the CBO puts it, "the effect of foregone innovation on health."
Terry Wilcox is the executive director of Patients Rising.
