IRA’s Drug Price ‘Negotiation’ Provisions Are the Wrong Answer

 The Inflation Reduction Act (IRA), signed by President Biden on August 16^th, includes provisions to address prescription drug prices. While the measure is billed as a step toward stemming the drug pricing crisis, it is a baby step at best. A better approach would be to incentivize innovations that deliver better medicines more cheaply.

The IRA allows Medicare, starting in 2026, to set  prices for 10 drugs, ultimately increasing to 20 per year from 2029. Even after a decade, this will impact only a small proportion of the thousands of drugs covered under Medicare Part D. In total, these provisions amount to an incremental change in drug pricing. According to the Congressional Budget Office, negotiations will save $101.8 billion over ten years, or less than 1.5% of the more than $7 trillion Americans will likely spend on drugs over the same period. This amounts to barely bending the cost curve when our goal should be to break it.

For Washington to be more effective in its efforts to lower drug pricing, it should focus instead on setting the right goals for pharmaceutical innovation and providing incentives to reach them. The government should support moonshot technological breakthroughs that allow for cheaper production and distribution of vital medications, particularly for chronic conditions.

FDA Commissioner Robert Califf, M.D., took a noteworthy step toward setting this goal in an op-ed last month. He argued that the biopharma industry should “review its priorities” and shift focus to developing more new treatments for common chronic diseases. Along with mental health, chronic conditions drive 90 percent of the nation’s $4.1 trillion in annual healthcare expenditures.

Lower cost treatments are well within reach. Revolutionary technologies are currently in development that can treat and prevent chronic conditions such as coronary heart disease and Alzheimer’s for a fraction of the cost of current drugs. Eradicating either of these diseases through broad, cost-effective access to preventive medicine would save over $350 billion per year. Even preventing a portion of annual diagnoses would save Americans far more than the IRA ever could.

If Washington wanted to support these innovations, it could. The U.S. government has proven that when it sets a national priority and dedicates the necessary resources to achieving it, almost anything can be done, and done quickly.

The moon landing, for example, became a reality only eight years after President Kennedy set the initial goal, despite representing one of the most daunting engineering challenges of all time. Operation Warp Speed (OWS) spurred the development of not one, but three vaccines for COVID-19 in less than one year, far faster than most thought possible.

How did the U.S. accomplish these feats? Vision setting, prioritization, and investment. NASA funding accounted for 4.4% of the federal budget in 1966, while OWS allocated $18 billion on COVID-19 drug development in 2020. Today, the entire budget for the National Institutes of Health is $46 billion, or approximately 1% of the federal budget, and it is spread amongst so many different research topics that the largest priority, cancer, gets only $6.35 billion.

Imagine what could happen if we made innovations in lower-cost therapies a true moonshot priority. The playbook could be similar to OWS: federal funding for grants, advanced purchase contracts, and manufacturing investments, combined with development partnerships in the form of FDA regulatory engagement and NIH collaboration on developing research models, cross-sharing of data, and running clinical trials. This full measure of support for innovation would be exponentially better than the half measure of price fixing contained in the IRA.

Solving this crisis is worth it. A 2019 study found that in the previous five years, one in eight Americans lost a loved one because they could not afford the cost of their medication. That figure is double for people of color. In the developing world the situation is far worse.

The IRA represents an evolution in Congress’s approach to drug pricing, but not the revolution that is needed. To spark a real revolution, we must acknowledge that drugs are only a fraction of overall health care costs, and that the best way to lower costs is to prevent the diseases that make expensive care and treatment necessary.

While it may be incomplete, the IRA is nonetheless welcomed by many in the healthcare advocacy space. Patients and their families – those who have lost much more than money to the high price of today’s drugs and treatments – deserve better. Now that Washington has broken the seal on reform, let’s double down and make this the national priority it deserves to be.

Mei Mei Hu is co-founder and CEO of Vaxxinity, a biotech company developing vaccines for chronic diseases such as coronary heart disease and Alzheimer's.

https://www.realclearhealth.com/articles/2022/10/03/iras_drug_price_negotiation_provisions_are_the_wrong_answer_to_the_right_question_111418.html