The findings from the Information Technology and Innovation Foundation (ITIF) mark a clear win for the drug industry as a whole and particularly companies like Sanofi and Roche’s Genentech, whose physician-administered pharmaceuticals, the cancer drug Jevtana and Lucentis for macular degeneration, respectively, could possibly be targeted under the White House proposal.
The Department of Health and Human Services (HHS) last week proposed to create a reference price for high-cost medicines paid for by Medicare based on mostly lower prices paid for the same drugs by other countries. The proposal is part of President Donald’s Trump’s promise to bring down the rising cost of prescription drugs.
The ITIF report found price controls would reduce how much money the biopharmaceutical industry puts into research, thereby slowing the pace of drug discovery. Further, price controls would damage the overall life-sciences innovation ecosystem by reducing knowledge sharing among firms.
The U.S. life sciences industry spends about 21 percent of its sales income on research and development, while accounting for 23 percent of domestic R&D funded by U.S. businesses, the report said.
“Price controls will slow the pace of drug innovation, and future generations will pay the price,” Rob Atkinson, who is both the author of the report and president of the foundation, said in a Nov. 5 statement.
“Without the knowledge generation that R&D stimulates, the next generation of Americans will be left with drugs that will be less effective than they could have been,” Atkinson said.
ITIF did not receive any drug industry funding to produce the report, a foundation spokeswoman told Bloomberg Law. The institute describes itself as a nonprofit, nonpartisan research and educational institute that develops and promotes policy solutions to accelerate innovation and boost productivity.
The White House proposal applies to coverage of drugs administered in doctors’ offices or hospitals under Medicare Part B.
The proposal would allow the Medicare program to negotiate prices with drug companies and eliminate cost-based payments for administering drugs that may encourage doctors to prescribe more expensive medications.
The HHS expects the plan to affect about a third of the $30 billion spent on those drugs each year by Medicare Part B.
Medicare currently pays average sales prices for the drugs administered in doctors’ offices and hospitals plus a 4.3 percent markup for providers. Seema Verma, the program’s administrator, has said perverse incentives in Part B have contributed to rising drug costs because they create incentives to prescribe higher-priced drugs.
HHS Secretary Alex Azar said the cost pricing plan would save $17 billion in Medicare drug spending over the next five years.
Prescription drug expenditures are rising faster than overall health spending, according to an HHS analysis. Medicare spent more than $174 billion on drugs overall in 2016.
Learn more in the ITIF findings, the Medicare International Pricing Index Model, the HHS notice on International Priciing Index Model, and the HHS analysis on prescription drug spending.
Selected information in the "Pharmaceutical Science Update" is compiled from summaries and articles from Bloomberg BNA.