American biopharma companies consistently bring to market the vast majority all new transformative medical therapies. The precision of these lifesaving medicines is an often-overlooked achievement of modern science. This sophistication comes at a huge economic cost – every element of drug discovery is expensive. It is also an inherently risky business, where failures are common and successful therapies can easily take over decade of research and development.
In the last decade, the Food and Drug Administration approved over 400 new medicines, including a breakthrough for cystic fibrosis, immune checkpoint inhibitors for solid tumor cancers, a new curative treatment for hepatitis C, cell therapy for leukemia and lymphoma, and, most recently, vaccines and treatments for COVID-19. Our pace of advancement delivers some of the most innovative and cutting-edge medical treatment options available to Americans before they are accessible elsewhere.
However, when it comes to our actual healthcare delivery system, we are operating in a fiscally unsustainable model. The most recent government effort to address runaway healthcare costs is The Inflation Reduction Act, which was signed into law last summer. Unfortunately, the law does not target the principal drivers of costs and instead has saddled the biopharma industry with a complex and ill-conceived price-setting scheme.
The Inflation Reduction Act’s drug pricing controls are already showing signs of damage to America’s unique biopharma innovation ecosystem, which will translate to fewer cures for patients down the road. In fact, the Congressional Budget Office (CBO) has given a very conservative estimate that the Act will lead to a 1% decline in newly approved drugs while saving around $200B over the next eight years. To put that into better context, Medicare will spend around $700 billion – $800 billion a year minimum, assuming costs remain about the same. But chances are that Medicare costs will keep going up. We’re talking – at minimum – multiple trillions of tax dollars going just towards Medicare spending during that same eight year period. This does not translate to a meaningful cost savings model.
Government price-setting restrictions have made it less attractive to invest in biopharma R&D. This decline in output of innovation will not only yield fewer treatments, it will mean a loss of high-paying, high-skilled jobs. Congress would serve Americans well by lowering out-of-pocket costs and improving patient access through commonsense solutions that don’t do more harm than it’s worth.
Tackling our national healthcare spending crisis is essential. Congress must address the broken elements of our healthcare delivery system that are driving the runaway costs. Going after the innovators ignores the actual culprits while guaranteeing unwanted repercussions.
Congress should rectify the innovation and job killing consequences of the Inflation Reduction Act with an approach that will lead to meaningful savings. We all want to control healthcare spending. Government price setting isn’t the answer.