Does cheaper mean better in cancer treatments?
TL/DR –
Joe Biden’s Inflation Reduction Act contains a framework for drug pricing that could potentially stifle innovation in drug development. The Act requires the Centers for Medicare and Medicaid Services to set a Maximum Fair Price for certain medications, referencing the prices of existing drugs as a starting point for negotiations, regardless of whether the new drug is more effective. The Act’s approach may disincentivize pharmaceutical companies from investing in better medicines, and could particularly impact the development of cancer drugs, which often offer significant advancements over time.
“`html
Washington’s Prescription Drug Pricing Schemes May Threaten Future Cures
As the midterm elections approach, Washington is exploring various methods to decrease the cost of prescription medicines. However, the way in which drug prices are reduced is crucial, especially when voters are unaware of possible repercussions. Misguided drug-pricing strategies can potentially hinder the development of future cures.
The Potential Threat of Inflation Reduction Act
The approach to drug pricing as outlined in the Inflation Reduction Act, proposed by ex-President Joe Biden, could potentially lead to the most adverse effects. This legislation, which was passed without any Republican vote, necessitates the Centers for Medicare and Medicaid Services to establish a Maximum Fair Price for specific medicines. This is achieved by comparing the cost of a new medication to existing ones, utilizing past prices as the negotiation starting point, regardless of improved performance by the new drug.
The Flaw in the Maximum Fair Price Concept
The Maximum Fair Price rule is comparable to a scenario in which an advanced minivan with superior safety technology is forced to start price negotiations at the cost of an older, less efficient model. Similarly, in the drug development sector, regulators utilize this method, disregarding the consequences.
Outcomes of the Maximum Fair Price Rule
According to initial negotiation rounds, almost two-thirds of the drugs chosen for the third round are expected to adopt the Maximum Fair Price set for a previous drug. Analyses of Medicare Part B and D drug spending data suggest that up to a quarter of the negotiated products could be for cancer treatment.
This could lead to a situation where a highly effective cancer drug, despite its improved clinical value, might have its Medicare price negotiation begin at a price that does not reflect its true value. Such a system does not encourage innovation.
Impact on Cancer Research
Progress in cancer treatment is gradual, building on previous scientific advancements. Newly developed drugs require years of research, with intricate trials that can monitor patients over an extended period to accurately gauge survival rates. If these improved drugs are priced similarly to older, less efficient ones, the incentive to develop better medication diminishes.
Effects on Investment
This flawed system affects investment choices. There has been a decrease in post-approval oncology trials, notably among small-molecule cancer drugs. Investment firms are moving away from oncology, citing government price anchoring as a primary concern.
Possible Solution to the Problem
There is still a chance to rectify this issue before the next round of Medicare price negotiations is fully enacted. The CMS should abandon the practice of using previously negotiated Maximum Fair Prices as reference points for future drugs. Rather, it should emphasize the value the drug provides to patients and caregivers. The University of Southern California’s Generalized Risk Adjusted Cost Effectiveness model could be used as a better starting point in translating value into a price range.
Affordability vs. Quality
While affordability is a commendable objective, a patient whose condition has become resistant to older treatment methods needs a better drug, not a cheaper one.
The author, Joe Grogan, is a senior visiting scholar at the University of Southern California’s Schaeffer Institute and has previously served as a domestic policy adviser to President Donald Trump. Currently, he consults for pharmaceutical and medical technology companies.
“`
—
Read More US Economic News