Could Sanders' plan to lower drug prices backfire?
Sen. Bernie Sanders' bill threatening to cut pharmaceutical companies' patent protections if their drug prices are too high has been hailed by some patient advocates as one of the first solid solutions to one of the healthcare industry's most talked about issues.
But drug industry insiders and analysts warn the loss of revenue caused by the Vermont independent lawmaker's plan could drive pharmaceutical companies to invest less in developing breakthrough medications.
"Patients in countries whose governments set prices wait years for new medicines and have far fewer treatment options," said Nicole Longo, spokeswoman for the Pharmaceutical Research and Manufacturers of America. "These policies reduce investment in research and development, slow progress in creating tomorrow's cures and will result in Americans having access to fewer new medicines."
Last week, Sanders and Rep. Ro Khanna (D-Calif.) unveiled a plan to target high drug costs by allowing the federal government to revoke patent exclusivity on products it deems "excessively priced" when compared to the average costs for the same drug sold in other industrialized countries. Drugmakers could lose patent rights, which would allow competitors to make generic versions.
The bill, called the Prescription Drug Price Relief Act, would require HHS to review brand-name drug prices annually and compare them with sale prices in Canada, France, Germany, Japan and the United Kingdom. The proposal also would allow HHS to consider other factors to determine whether a drug is "excessively priced," such as the size of the affected patient population, the value of the drug to patients and the cumulative global revenue generated by the drug.
In a summary brief released Nov. 20, Sanders estimated the bill could lower the median price of brand name prescription drugs by 43%.
"The core problem of high drug prices is one of monopoly power," said Peter Maybarduk, access to medicines director for the consumer health advocacy organization Public Citizen. "This (bill) would force companies to play ball, or at least bring their prices in line with other ... nations, or lose the thing they care about most."
Longo said Sanders' bill would be akin to allowing other countries to set the price of drugs sold in the U.S. She contended the plan would limit access to new drugs, much like the Trump administration's proposed International Index Pricing Model. That plan would index Medicare Part B drug costs to the prices paid by other wealthy countries.
But the White House proposal would affect less than 3% of the $480 billion U.S. drug market, according to Maybarduk, while Sanders' plan would apply to the entire brand-name market.
"Rather than improving the U.S. healthcare system and helping patients access medicines, these policies would threaten America's ability to remain competitive and instead replicate flawed policies of countries where patient needs are brushed aside," Longo said.
The U.S. pays a higher price for prescription pharmaceuticals compared to other countries. According to a 2017 analysis conducted by the Commonwealth Fund, U.S. per capita spending on pharmaceuticals in 2016 was $1,011, compared with Switzerland, which had the next highest average at $783.
Critics like Maybarduk have blamed the disparity on the fact that the U.S. government does not regulate or negotiate prices with drug companies when they come to market. Drug industry supporters have argued that the list prices for drugs sold in the U.S. are necessary to ensure companies have incentives to invest the hundreds of millions of dollars it takes to develop and bring a new drug to market.
A 2016 study by the Tufts Center for the Study of Drug Development published in the Journal of Health Economics estimated it cost an average of $2.8 billion in 2013 for a company to develop a medication that was ultimately approved by the U.S. Food and Drug Administration. But that figure has been disputed as an overestimate by a number of critics.
Other research has found R&D costs are substantially less. A 2017 study published in JAMA Internal Medicine of 10 cancer drugs found the median cost for developing a cancer drug is $648 million, with median revenue of about $1.6 billion.
The U.S. Government Accountability Office estimated drug companies spent an average of 13% of their total revenue in 2014 on research and development, an 8% increase from 2008. The same report concluded more competition could encourage greater R&D investment.
Trump has contended the current system allows other countries to "freeload" by paying less than the U.S. for the same medications, and that the U.S. essentially subsidizes the development of innovative drugs for the rest of the world. The Sanders plan might result in other countries having to pay more for their drugs if U.S. prices suddenly dropped. But it could also lead to a smaller global market if other countries curb their drug purchases due to the increasing prices. Industry supporters say that would lead to less R&D.
Lowering drug prices has been touted as a major priority of the Trump administration. In May, the White House unveiled its blueprint to lower drug prices that included proposals for the FDA to require pharmaceutical companies to disclose drug list prices in their direct-to-consumer television ads, as well as increasing efforts to inform beneficiaries in Medicare Parts B and D about cost-sharing and lower-cost alternatives. But the White House plan fell short in calling for Medicare to negotiate drug prices similarly to how other countries set their own price limits.
Maybarduk said threatening to revoke drug companies' market exclusivity could be more effective than most of the White House proposals.
"Costs could be a fraction of what they are, but we're going to have to put the fear of God into these companies and shake up that business model," Maybarduk said.
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