Incentivizing Innovation: A Better Approach to Drug Affordability
Written by: Mac Rung
If you take a look at the world’s leading pharmaceutical companies – the majority are American. Despite this, public sentiment in the US towards pharmaceuticals seems to veer on the side of skepticism, leading to anger at corporations for prioritizing profits over public health, and calls to reform the dynamics of the industry as a whole. The anger is reasonable – financial stability and health should not be mutually exclusive – but is often misdirected at the pharmaceutical industry. Instead of placing emphasis on cost reductions through price controls, advocates should prioritize lowering costs through insurance reform that benefits patients directly.
Take it from me. I was born with Cystic Fibrosis in the year 2000, when very little treatment was available to address the disease. Throughout lower school, I struggled to gain weight and eventually saw my lung function begin to gradually decline. It was this – the progressive nature of the disease – that always caused my family to worry about my next steps, while planning for a future that was never certain.
By some measure of luck, the same year I was born marked the beginning of ground breaking research aimed at fundamentally transforming the treatment of CF – a vision made possible by investors who believed in its potential. As I prepared to leave for college – at a time when my lung function could have continued to decline – this vision came to fruition. The treatment became commercially available, parting the clouds that once obscured my future.
While inspiring, my journey should not be unique. It serves as one small example of why we must encourage innovation – not pass laws that will squelch it.
Government’s role in this aspect of the pharmaceutical industry should be to create the atmosphere of prosperity, allowing innovation to thrive and patients to benefit. Unfortunately, recent actions have moved the needle in the opposite direction. The passage of the Inflation Reduction Act (IRA) was a win for some Americans, but it comes at the expense of biomedical innovation.
There are concerning elements of the act that will hinder drug discovery by stacking odds even higher against drug developers. The act makes small molecule drugs – medications that come in pill form – eligible for government price negotiation at only 7 years post launch, with controls going into effect 2 years later. Until now, patent protections typically lasted around 14 years,
providing manufacturers the financial runway needed to pay off investments and diversify profits into future drug candidates.
This year there are potential solutions on the table in Washington to address this issue, such as a bill that would align the price negotiation timeline for small molecule products with that of biologics, beginning 13 years post market entry. This removes the “small molecule penalty” that discourages innovation in the drug class due to the shorter profit window compared to biologics.
A 2024 proposal would have addressed the issue with ‘orphan drugs’ designations – awarded to medications developed for a relatively small, rare disease population. Currently, the IRA only exempts a drug from price controls if it’s designated for a singular orphan condition. Passing legislation allowing manufacturers to seek multiple designations for a single drug without losing exemption status would ensure more patients have access to cutting-edge treatments.
As current legislation stands, the investment made back in 2000 in a small molecule therapy targeting CF would no longer make sense in today’s climate. While life changing treatment entered my life at the right time, looming price controls stand between my experience and other rare disease sufferers, who deserve the same renewed outlook on life I have been afforded. If the end goal is to truly help the patient, the companies driving change shouldn’t bear the brunt of the industry’s flaws. It’s time we shift our focus towards actions that benefit patients’ long term viability, and preserve our country’s culture of incentivization that continues to drive advancements in global health today.