The Congressional Budget Office (CBO) recently released a Simulation Model of New Drug Development that mimicked the Elijah E. Cummings Lower Drug Costs Now Act (HR 3) introduced in the 2019-2020 Congressional session. Under the simulation, CBO estimated that it was likely that between 21 and 59 fewer drugs would be brought to market over the next three decades as a result of such legislation.
Under the Elijah E. Cummings Lower Drug Costs Now Act, the Secretary of Health and Human Services would be required to negotiate drug prices for insurers that participate in Medicare Part D, cap drug costs at 120% of international prices, and prioritize drugs to areas where the impact would be greatest. A prior CBO working paper estimated the average resulting drive price would fall between 57 and 75%.
The CBO simulation found that a policy similar to the Elijah E. Cummings Lower Drug Costs Now Act would lower expected returns on drugs between 15% and 25%. Further, it would result in 2 less drugs entering the market annually in the first decade of the policy being enacted, 23 fewer drugs in the second decade, and 34 fewer drugs by the third decade. The simulation conducted by CBO allows for a wide variation in the number of drugs that can enter the market.
In the report, CBO noted that it has not estimated either “which types of drugs may be affected nor how the reduction in the number of new drugs will affect health outcomes.” CBO also stated that the “policy may lead to lower prices and increased usage for drugs already on the market. CBO has not determined the overall effect of the policy on health outcomes.”
Reactions
PhRMA President and CEO Stephen J. Ubl released a statement in response to the report, saying that the model “is further proof that patients with devastating disease could be denied access to medicines today and in the future” and that policymakers should instead be focused on “capping out-of-pocket costs in Part D, lowering cost sharing and spreading those costs over the calendar year, and making sure the savings negotiated with health plans are passed to patients.”
Ubl also cited research by the Kaiser Family Foundation that found that 65% of voters oppose government negotiations of drug prices upon learning that it could “lead to less research and development of new drugs.”
Rachel E. Sachs, Professor of Law at Washington University in St. Louis posted a thread on Twitter in response to the CBO model, saying the CBO report is a model for any legislative proposal that impacts drug development and “should be applied to proposals that would increase incentives, too.”
Sachs also wrote a recent article in the Journal of Health Politics, Policy and Law, where she noted that “[r]ecognizing that there is a point at which drug price reductions will translate into decreases in R&D investments, policymakers should consider whether portions of the savings from drug price reforms should be reinvested in biomedical research, to counteract the investment disincentive.”