Biotech leaders urge fixes to bad Senate drug deal
July 8, 2022
Lend your support to the following open letter to Congressional leaders by completing the short Google Form at the end.
Dear Majority Leader Schumer, Chairman Wyden, and members of the United States Senate:
We are deeply concerned the new Senate drug bill fails to deliver adequate relief to the nation’s seniors and their families. It falls short of a generational opportunity to meaningfully lower Medicare beneficiary and taxpayer out-of-pocket costs. The revised language is not good enough for patients, bad for biopharma innovation, and provides no guarantee that PBMs and insurance plans will share savings with beneficiaries.
The bill’s proposed $2,000 catastrophic cap helps only a small percentage of beneficiaries, and the new text now delays implementation until 2024. Fewer than 900,000 of the more than 32 million non-Medicaid eligible Medicare beneficiaries had out-of-pocket costs above the $2,000 cap in 2019. The bill must do more to help the majority of beneficiaries who face a roughly $500 deductible before any cost-sharing kicks in for physician prescribed therapies.
The new reconciliation bill includes other bad news for Medicare beneficiaries:
It REMOVES the $35 insulin copay cap to help disabled and seniors treat chronic diabetes.
It offers NO HELP for seniors with lower deductibles or first dollar coverage relief.
It INCREASES Part D cost sharing for all beneficiaries from 23% to 25%.
The bill makes these changes to help Part D insurers and PBMs take advantage of government pricing yet repeals the requirement that health insurers and PBMs pass prescription drug discounts on to patients. Without it, seniors will have no protection from Medicare Advantage plans and PBMs that instead can continue to pocket the savings – even when the government does the negotiation for them.
Worse, the bill skews research and financial incentives toward costlier, physician-administered injectables. Simply put, this will result in fewer new drugs developed by U.S.-based biotech companies. It places price controls on small molecule pills only 9 years after approval (by comparison, price controls on large molecule injectables are imposed after 13 years).
Grassroots feedback from leading biotech researchers and funders explains that this arbitrary Medicare distortion will shift R&D from low-copay, easy-to-genericize pills to higher-copay, harder-to-copy injectables, and saddle patients with even more costs: unlike pills, injectables often require a visit to the doctor or infusion center (and associated costs for administration).
Today, drugs average about 14 years on the market before facing generic competition. That’s enough time in which to generate necessary returns to convince investors to back risky R&D, fueling the world-leading U.S. biomedical innovation engine for the world’s patients.
Consider that small changes in interest rates since the beginning of the year have contributed to biotech losing 60% of its valuation, undermining the ability of many companies to secure funding. And yet, while interest rates do fluctuate, this bill as written will permanently cut the reward period for the entire small molecule biotech toolkit from an average of 14 years to just 9, a reduction far more dramatic than an interest rate change.
This bill would represent a tipping point downward for U.S. innovation from which it would take many years to recover even if this policy were eventually reversed. Reducing the incentive to discover and develop new drugs will result in far fewer advances of the kind only small molecules are capable of for diseases with substantial Medicare coverage, like cancer and dementia.
The acceleration of progress against cancer spurred by the creation of Part D would be substantially reversed. The cancer moonshot would remain grounded; without the private sector funding required for lengthy development, NIH basic research won’t be translated into actual medicines that can help patients (which is to say, all of us, eventually). Fewer small molecule drugs being invented means ultimately higher overall costs. The drugs this bill would stop from being invented would have 1) reduced acute care and other costs permanently and then 2) added to savings by themselves going generic.
This bill must be fixed before passage. Congress can do better. It should further revise the bill to:
Do more for beneficiaries by eliminating the deductible and creating a $100/month out-of-pocket cap.
Guarantee insurers and PBMs pass savings on to beneficiaries.
Empower Medicare to negotiate deeper discounts for ALL drugs ONLY AFTER 14 years on the market.
With the above changes, we are confident that we can achieve our shared goals of making today’s medicines affordable for patients while ensuring that we can all look forward to better and affordable medicines tomorrow.
Sincerely,
(To join us in signing this letter, please click here, and you’ll be asked to enter your name and affiliation. Your contact information will not be shared except for adding your name as a signer to our letter to Congress. A version of this letter with updated signatories is available here.)
Peter Kolchinsky
Managing Partner
RA Capital Management
Keith Murphy
CEO and Founder
Viscient Biosciences
Peter Rubin
Executive Director
No Patient Left Behind
David Beier
Managing Director
Bay City Capital
Please click here for important RA Capital disclosures.
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