Investors Want New Drugs for a Better World — And a Return on Their Money
By John Stanford
Congressional Democrats have reintroduced H.R.3, a drug price-control bill that passed the House in 2019 but failed in the Senate.
Democratic leadership believes it will have better luck this time. While that remains to be proven, one truth stays constant: H.R.3 would hurt the very patients Democrats want to help.
Here's why. I represent a coalition of life-science investors, all of whom support legislation that would make drugs more accessible. But from the perspective of the biotech investor, the Elijah E. Cummings Lower Drug Costs Now Act -- to give HR.3's full name -- could just as easily be called the End Investment In Biotech Now Act.
The proposed law sets a "maximum fair price" for new medicines. When the bill was first introduced in 2019, the Congressional Budget Office forecast that it could slash prices by as much as 75 percent, and save the government $456 billion over 10 years. That means $45.6 billion would likely be stripped away from American innovators each year.
Shepherding this measure to fruition would send a clear message to life science investors: you aren't wanted here. To patients, it says we've reached the pinnacle of medical discovery, leaving unmet needs, well, unmet. After all, sustained private investment into American biotech firms drives innovation.
A Journal of the American Medical Association study -- which looked at new "therapeutic drugs and biologic agents" approved by the Food and Drug Administration between 2009 and 2018 -- found that the "estimated median capitalized research and development cost per product" was $985 million.
Billions were spent in the pursuit and perfection of the Covid-19 vaccines helping humanity battle the pandemic. And there are plenty of other examples of cutting-edge therapeutics.
AXS-05, from Axsome Therapeutics, targets depression and Alzheimer's. Cabometyx, developed by Exelixis, treats kidney and liver cancer. Trikafta, from Vertex Pharmaceuticals, treats the underlying causes of cystic fibrosis. We wouldn't have these drugs without investors.
Pay attention to that last word: investors. These are people who "invest" our money, not give it away. They're often stewards of Americans' retirements and educational institutions via pension funds and endowments, with a solemn obligation to grow the capital they deploy. Despite the daunting expenses and complexities, investors continue to pour money into biotech in the hope that their investments will eventually yield new medicines for patients.
They do so, also, to reap a return.
If the government introduces price controls, that critical incentive would be crippled. The reason? The big winners pay for the big losers. They also pay for the hundreds of medicines that are made despite not being a commercial success.
If we cap the winners, or even remove the possibility of a big return, investors would have no choice but to dedicate their resources elsewhere.
And what about the patients?
The Congressional Budget Office estimates that H.R. 3 would result in between eight and 15 fewer drugs coming to market over 10 years.
A study by healthcare analysts at Vital Transformation found that H.R. 3 would lead to an 88 percent drop in new medicines developed by small biotech companies.
We can't know exactly what we'll lose. Maybe it will be a cancer treatment, or a cure for Alzheimer's disease.
Or maybe it will be a vaccine -- against the next pandemic.
John Stanford is executive director of Incubate, a coalition of life sciences investors that works to inform policymakers on the role of venture capital in bringing promising ideas to patients in need. This article originally appeared on InsideSources.com.
