About the Author: David A. Ricks is Managing Director of Eli Lilly (ticker: LLY).
American patients pay too much at the pharmacy counter for innovative drugs. It’s something everyone can agree on. But in the rush to find an easy solution to the high drug costs, we are threatening the innovation system that creates new life-saving treatments.
America is the birthplace of disruptive pharmaceutical innovation. American biopharmaceutical companies create nearly two out of three new drugs. Today, patients have drugs for diseases like diabetes, cancer, HIV, and Alzheimer’s disease that previous generations could only dream of. And American patients have access to new drugs faster than any other country.
But now, as part of their multibillion-dollar budget reconciliation plan, some in Congress want to replace that system with one in which government officials determine the value of a treatment and whether patients should have access to it. If a drug maker does not accept the price set by the government, it will face a tax penalty that will quickly rise to 95% of the drug’s gross sales.
Such a move would devastate the biopharmaceutical industry and shatter the hopes of those living with diseases we still cannot cure, while ignoring the structural reasons why direct drug costs are too high for too many.
Patients would lose access to the most advanced treatments.
Compare the United States with countries that engage in government pricing. Americans have access to almost 90% of new treatments launched between 2011 and 2017. In Britain, only 60% of these drugs are available, while Canadian patients have access to only 44%.
Or think of the Veterans Health Administration, which also sets prices and has a national formulary to determine which medications veterans can and cannot receive. The VA covers 16% less common drugs than the typical Medicare Part D plan, according to a 2015 report.
U.S. policymakers won’t be able to get the lowest prices they want without similar access cuts, which the Congressional Budget Office has confirmed.
They will also prevent the creation of new drugs. It takes years and costs an average of $ 2.6 billion to bring a new drug to market. At Lilly, we spent over $ 6 billion on research and development in 2020.
This investment included studies on neutralizing antibodies as a treatment for Covid-19, a positive phase 2 clinical trial for a potential treatment to fight Alzheimer’s disease and the pursuit of regulatory approval of the first drug to treat certain lung and thyroid cancers. These future drugs are funded by the sale of today’s drugs.
The cost and risk associated with drug development are among the reasons that large, established pharmaceutical companies like Lilly often team up with new biotech companies.
In our total effort to defeat Covid-19, for example, Lilly partnered with AbCellera in March 2020 to identify and develop antibody therapy to neutralize the virus and save lives. AbCellera’s technology uncovered the most effective antibody, while Lilly’s expertise and ability to develop drugs on a large scale took the idea from the lab to patients. Less than 10 months later, we received emergency use clearance from the Food and Drug Administration for this drug, a speed record facilitated by our combined efforts.
Also earlier this year, Lilly acquired Protomer Technologies, which could help us revolutionize the treatment of diabetes as we develop a potential new type of insulin that can automatically detect and adapt to the levels of blood sugar in the blood. ‘one person.
Such partnerships push the boundaries of medical science. When we work with biotech startups, we provide essential regulatory, manufacturing and other expertise that would take years and significant investments to duplicate.
Government price controls would decimate this ecosystem. If the House Democrats’ plan becomes law, drug discovery in the United States will take a devastating blow. My company would be forced to reduce its R&D spending by more than 40% and move away from the riskiest projects, but potentially the most innovative. And the young biotech companies will simply cease to exist because their venture capital will be depleted.
Lawmakers can reduce direct drug costs to patients without sacrificing innovation.
Prescription drugs sold at retail represent only 10% of overall health care spending. Hospital stays and doctor’s visits cost significantly more overall. But in recent years, insurers have shifted more of the cost of drugs onto patients through greater use of deductibles and other out-of-pocket expenses.
Capping the annual drug spending of Medicare registrants and making those costs more predictable each month would help solve this problem. The same would apply to requiring insurers and other intermediaries to share with patients the tens of billions of dollars in annual rebates from pharmaceutical companies that they receive.
Smarter solutions abound. For the sake of patients, I hope our leaders will choose a wiser path.
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