Among our many learnings from the COVID-19 pandemic is that a robust and effective medical innovation ecosystem is essential to researching and developing treatments, vaccines and cures for new and emerging threats to human health, as well as finding life-saving innovations for existing, but still unmet, medical needs.
Instead, we are spiraling in the opposite direction. A new study by the research firm Vital Transformation concludes that the government price-setting embodied in the Inflation Reduction Act’s first-ever government price controls in Medicare Part D — if compounded by recent proposals contained in the president’s proposed budget and other proposed congressional legislation — will cause an estimated 230 fewer FDA approvals of new medicines over a 10-year period. This astounding figure would most heavily impact the therapeutic areas with the greatest unmet needs: cancer drugs, neurological treatments, therapies for rare diseases and critical pharmaceuticals that can prevent the spread of infectious disease.
The consequences to human health will be devastating. Such onerous policies threaten to stunt — and in some cases, halt — many promising advances in medical research and treatment. The IRA — which imposes government price-setting nine or 13 years after a drug’s FDA approval — has already prompted some life sciences companies to withdraw new medicines from clinical trials because of the likelihood there won’t be a sufficient return on their significant investments in research, development and manufacturing to reinvest in new projects.
The additional proposals being considered would shorten the price-setting time period to just five years — an even more aggressive move carrying serious potential consequences before we even know the ramifications of the IRA’s current time frames. The new Vital Transformation study concludes that, if this shortsighted five-year proposal had been enacted a decade ago, more than 80 currently available drugs likely would never have been developed — drugs that today save and improve countless lives in New Jersey, the U.S. and around the world.
The reason is because every advance in human health requires an enormous financial investment, often more than $2 billion, to create a single, new breakthrough product. Most of these efforts fail — in the laboratory, in clinical trials, in the FDA approval process — meaning none recoups the billions of dollars invested in the many failed initiatives. Allowing manufacturers only five years to recover their investment in the small handful that do succeed will drive dollars away from biopharmaceutical research and development in the U.S., and, consequently, result in fewer promising treatments moving forward, fulfilling Vital Transformation’s chilling projection.
In addition to the impact on patients and global human health, potentially devastating impacts to jobs and state economies — New Jersey’s and others’ — are likely. Vital Transformation estimates that these policies would result in losses around the country over a 10-year period of between 146,000 and 223,000 direct biopharmaceutical jobs and 730,000 to 1.1 million total U.S. jobs. In New Jersey alone, the study projects a loss of between 10,987 and 16,743 direct biopharmaceutical jobs and total job loss of 55,241 to 84,180, coupled with a negative economic impact of between $15.1 billion and $23 billion that would be second only to California’s.
New Jersey residents shouldn’t have their lives, their jobs and our state’s economy ravaged by misguided government price-fixing policies that are already having injurious consequences that were foreseeable. While there is an undeniable need to make health care more affordable, there are better solutions than government-mandated drug-pricing policies that, while designed to save the government money in the short term, will negatively impact patients. As we’ve often said, we can start by requiring pharmacy benefit managers and other middlemen to pass on the billions of dollars in negotiated rebates to benefit patients directly at the pharmacy counter.
We will continue working with all stakeholders — innovators, policymakers and other health care sectors — to find ways to increase access and affordability that will not jeopardize future medical advances, treatments and cures. If we don’t succeed, our future will be far less healthy than it ought to be.
Dean J. Paranicas is CEO and president of the HealthCare Institute of New Jersey.