Weekly Policy Update: New Study Examines Impact of Federal Drug Pricing Proposal
By: Colorado BioScience Association Date: 04/02/2021
Last week, the Council of State Bioscience Associations released a new study that shows the impact of foreign reference pricing on patient access to lifesaving medicines and investment in new treatments and cures. (CBSA is a member of the Council.)
The study was conducted by Vital Transformation, an international health economics firm. It examines the negative impacts of drug pricing proposals, like H.R. 3, the “Lower Drug Costs Now Act of 2019,” that use international reference pricing to control U.S. drug costs.
What is international reference pricing?
International reference pricing sets a maximum US price based on the prices for medicines paid in other countries. The problem is that those countries have different health systems that restrict availability and access to innovative medicines.
The new Vital Transformation report shows that international reference pricing would slash investment in R&D and destroy the pipeline of new, innovative therapies. It would be equally devastating for small and mid-size biotechs, which represent the majority of Colorado’s life sciences ecosystem. The startups and early-stage companies in our ecosystem rely heavily on investments from venture capitalists and larger companies to bring new therapies to market. Proposals like H.R. 3 would reduce earnings by 62% on average for impacted companies, and in turn, reduce their investments in smaller company R&D.
The research found that, had a bill like H.R. 3 been in place from 2009-2019:
- A basket of 68 innovative therapies that were developed by small and emerging biotechs and approved during that timeframe would have been reduced to only 7, leaving critical health care gaps for millions of Americans.
- New medicines for some of the most difficult conditions to treat, including in rare diseases, oncology, and neurology, would be disproportionately impacted.
- Biopharmaceutical industry job losses alone would total nearly 191,000, with total job losses across the economy of more than 950,000 when indirect effects are included.
- Triggering these losses would be the sharp drop in U.S. biopharmaceutical industry earnings (a 62% reduction, or $125 billion in 2024 alone) caused by the bill, leading to large reductions in established companies’ ability to invest in small and emerging biotechs, chilling drug development.
Impact on the Colorado Life Sciences Ecosystem
The new report shows how foreign reference pricing proposals would devastate investment in biopharmaceutical innovation, and in particular, hurt small and mid-size biotechnology companies.
Companies impacted by H.R. 3 would significantly reduce their investment in small company R&D, and in Colorado, that means an investment loss of over $11 billion.
If the bill had been enacted, it also would have eliminated 8,153 jobs and $2 billion in economic output per year in Colorado.
CBSA is very concerned about state and federal policy proposals to allow government price setting for medicines. We continue to work closely with our members and industry partners to educate policymakers about how these proposals could hurt our life sciences ecosystem and the patients we serve. CBSA is focused on advancing affordability solutions that correct market failures, increase competition and lower costs for patients.