Joe Biden has been elected as the 46th president of the United States. Control in the Senate, however, is still undetermined and hinges on Georgia’s two runoff races. Currently, Republicans hold a 53-47 majority in the U.S. Senate. In this election so far, Democrats have gained one new seat in the Senate but would need two more for a 50-50 split. In the event of a 50-50 split, vice president-elect Kamala Harris would be able to cast tie-breaking votes in the chamber. The tie-breaking vote would allow Democrats to make strides in instituting a plethora of policies into law. Among these potential laws are president-elect Biden’s drug pricing policies. Biden’s drug pricing platform touts championing affordability through international reference pricing, price caps, and government negotiating in the biotech market. These drug pricing policies will only hurt patients by reducing access and availability of life-saving technologies and chill investments in research.
Imposing Price Caps, International Reference Pricing
Biden plans to impose limits on launch prices for new, innovative biotechnologies. Under Biden’s plan the Secretary of Health and Human Services will establish an independent review board to assess the value of new biotechnologies, and recommend a price based on the average price in other countries. The price recommendation will be the rate Medicare, the public option and private plans will pay. Biden also plans to make a condition of participation in the Medicare program, a prohibition from increasing drug prices more than the general inflation rate. There will be a tax penalty on drug manufacturers that increase the costs of their biotech, or price their generic over the general inflation rate. Biden will also repeal the existing law explicitly barring Medicare from negotiating lower prices with drug corporations.
These policies are predicated on regulating prices through international price referencing, unnecessary price caps, and government interference. Biden’s policy will not privilege patient access, affordability or incentivize innovation. Price caps on newly developed technology will reduce investment in future life-saving biotechnology. The biotech and patients in the US have a symbiotic relationship, drug companies make large profits on their best-selling drugs to reinvest in the development of new drugs. A large portion of “profits” goes to research and development before it is distributed to shareholders. The revenues from a new drug must cover the costs of failed research efforts, which generate no revenues. These revenues must also pay for the extensive delays between initial research and product sales. Furthermore capital expenditures account for roughly half of the total costs of developing new drugs. A large portion of what remains after accounting for these various costs goes into new research on the next generation of drugs.
Price referencing legislation does not account for the differences in availability of new technologies within other countries and halts research and development of new therapies. Price controls in Organization for Economic Co-operation and Development countries reduced investment for research and development by $5 billion to $8 billion. The US has the greatest access to new innovative technologies, and international reference pricing (IRP) will hurt this access, Nearly 90% of new medicines launched since 2011 are available in the US compared to just 50% in France or 46% in Canada. Prior to adopting IRP, European based companies invested 24% more in research than US companies and by 2015 they were 40% behind the US counterparts. Finally, IRP is not correlated with affordability, less than 1% of Medicare beneficiaries would see reduced out-of-pocket costs.
Allowing the Purchase of Prescription Drugs from Other Countries
In order to create more competition for U.S. drug companies, Biden wants to allow consumers to import prescription drugs from other countries. Opening borders for drugs could create unnecessary risk for the American people. The drug distribution system for prescription drugs in the U.S. is a “closed” system because it provides Americans with multiple levels of protection against receiving unsafe or poor quality medications. Importation can create an opening in this closed system that could increase the opportunity for counterfeit, substandard, or unapproved products to enter the supply chain.