Will ‘Build Back Better’ Spell Disaster for Pharma Innovation?

by Leslie Small

The House of Representatives on Nov. 19 passed Democrats’ hard-fought, $1.7 trillion social spending bill, bringing it significantly closer to becoming law and ushering some of the most ambitious drug pricing reforms ever attempted. 

With the fate of the Build Back Better Act now in the hands of the Senate, the debate over how its drug pricing provisions will impact innovation in the life sciences industry has never been hotter — especially now that the Congressional Budget Office (CBO) has weighed in. 

CBO Outlines the Bill’s Impact 

• The CBO estimated in its Nov. 18 report that the drug pricing reforms included in the Build Back Better Act will result in 10 fewer drugs entering the market over the next 30 years, out of an expected 1,300 new drugs. 
• Regarding savings, the CBO said allowing Medicare drug price negotiation will save the federal government about $79 billion, requiring rebates if drug list prices aren’t capped at inflation will save about $84 billion, repealing the Part D rebate restructuring rule will save about $143 billion, and redesigning the Part D benefit will save about $1.5 billion. 

Backlash Is Already Underway 

• “The consequences of this ill-considered plan to give HHS enormous, unchecked power to unilaterally reduce Medicare drug costs will have far-reaching and devastating ramifications: reduced investments in life-saving drug R&D, slower economic growth and reduced health care quality for U.S. patients, to name just a few,” Numerof & Associates President Rita Numerof, Ph.D., writes in a statement emailed to AIS Health. 
• The Pharmaceutical Research & Manufacturers of America took a similar position, with PhRMA President and CEO Stephen Ubl writing in a Nov. 19 statement that the bill “will stifle continued innovation after a medicine is first approved, discourage the introduction of generics and biosimilar treatments and undermine the robust competition that has made the Medicare Part D program a success for millions of seniors.” 

Bill Differs From H.R. 3 

• Unlike in H.R. 3, Democrats’ more robust drug pricing legislation, the Build Back Better Act would limit Medicare negotiation to drugs with the highest gross spending in Medicare Part B and Part D that are also single-source therapies and have been on the market for nine years or more (for small-molecule drugs) and 13 years (for biologics). It also doesn’t apply to the commercial market. 
• Even though the Build Back Better Act represents a scaled-back version of H.R. 3, it’s not entirely unsurprising that PhRMA and other stakeholders are still crying foul Loren Adler, associate director of the USC-Brookings Schaeffer Initiative for Health Policy, tells AIS Health. 
• While Adler says he’s “confident that there is a substantial difference in the effects on new drug development” from H.R. 3, he adds that “there’s no distinction drawn between relatively small reductions in revenue and huge reductions in revenue.” 

From Radar on Drug Benefits