Passing a federal law that trims drug industry profits on companies’ top products by between 15% and 25% would lead to about 2 fewer drugs (-0.5%) being introduced in the U.S. in the law’s first decade, 23 fewer (-5%) in the second, and 34 fewer (-8%), in the third, congressional budget analysts say.
That’s a slightly different outlook for the prescription drug pipeline than the Congressional Budget Office (CBO) offered three years ago when it simulated the effect of enacting H.R. 3, the House Democrats’ bill empowering the U.S. Health and Human Services (HHS) secretary to negotiate better prescription drug prices for the Medicare program; require drug manufacturers to pay a rebate back to the federal government if they increase prices faster than inflation; and cap Medicare enrollees’ out-of-pocket spending on prescription drugs at $2,000 per year.
In October 2019, CBO projected that passing H.R. 3 would have reduced global revenue for new drugs by 19%, leading to about 8 fewer drugs (-3%) introduced to the U.S. market over the 2020–2029 period and 30 fewer drugs (-10%) over the next decade.
CBO released its new projections on Aug. 26. Congressional Democrats are expected in September to include provisions to lower drug prices in a must-pass budget reconciliation bill. The drug industry has argued against such action, saying it would harm drug development.
340B covered entities are worried that the bill might include language forcing Medicaid managed care organizations to pay providers no more than actual acquisition cost plus a dispensing fee for drugs dispensed to enrollees.
The CBO’s model is based on revenue estimates using non-public Medicare Part D data, including manufacturer rebates, as well as a 2016 study of manufacturers on their estimated costs to bring some 100 different drugs to market. It concludes that the returns on the most profitable new drugs would be reduced by 15% to 25%.
While estimated changes are small as the law rolls out because the CBO notes “key decisions for drugs entering in those years would have been made before the policy change,” it increasingly gains momentum as time goes by, particularly after the first five years.
The CBO said that due to lack of diversity in available data, the conclusions of its simulation are “uncertain.” The agency also noted that it “has estimated neither which types of drugs may be affected nor how the reduction in the number of new drugs will affect health outcomes. In addition, the policy may lead to lower prices and increased usage for drugs already on the market. CBO has not determined the overall effect of the policy on health outcomes.”
Meanwhile, proponents for and against federal drug pricing legislation were anything but uncertain.
The advocacy group Patients for Affordable Drugs Now concludes that the impact would be minimal.
“As we know, anew drug does not necessarily mean new innovation—only 10% to 15% of new drugs represent true therapeutic advancements,” said David Mitchell, president and founder for Patients For Affordable Drugs Now. “The 7% loss may have no effect on development of truly innovative medications that would bring patients relief and command higher prices.”
The Pharmaceutical Research and Manufacturers of America begged to differ.
“The new report from CBO makes one thing clear: Patients face a future with less hope under Congress’ current drug pricing plan,” said PhRMA CEO and President Stephen Ubl. “The report finds that even under CBO’s conservative assumptions at least 60 new treatments and cures will be sacrificed if this proposal becomes reality and is further proof that patients with devastating disease could be denied access to medicines today and in the future.”