Democrats Choosing Less Risky Path on Drug Prices

Venture firms that invest in biotech now don’t necessarily have to. Their money could just as easily go into other profitable sectors of the economy, like technology. Early stage drug companies are funded, in part, because America’s high drug prices mean that a successful drug will be worth a huge jackpot. Since the rest of the world pays less, nearly all of that investment is directed at the U.S. market.

The original House proposal to regulate drug prices would have allowed the government to lower the price of up to 250 expensive drugs, no matter how new or how innovative they were. The new approach limits that power: Drugs would be subject to price regulation only after they have been on the market for about a decade. That would mean drug companies could still charge enormous prices for new drugs, but they could do so only for so long. The law would allow price regulation after nine years for most common medications, and 13 years for more complicated drugs known as biologics.

Peter Bach, the director of the Drug Pricing Lab at Memorial Sloan Kettering, and the chief medical officer of Delfi Diagnostics, has been a longtime outspoken advocate for drug price reforms. He said a delayed approach would protect the public and the government from what he sees as the industry’s most egregious practices — the endless price hikes and patent shenanigans that often insulate expensive drugs from competition for decades. But he also says it will keep the promises of the country’s intellectual property system by giving the companies a few years to profit off their new inventions.

“It all aligns with core premises in our system,” he said. “And reining in distortions that have crept in.”

The original legislation was almost guaranteed to discourage the creation of some future drugs. The nonpartisan Congressional Budget Office said it would lead to 3 percent fewer drugs in the first decade of its life, and 10 percent fewer in the decade after, as it affected drugs earlier in the pipeline. Other scholars of the system, including Mr. Garthwaite, say the effects could be even larger.

Stephen Ubl, the C.E.O. of the industry trade group PhRMA, had described the threat of the original bill as “existential” to his industry. He sounded no less concerned in a statement this week about the new proposal: “If passed, it will upend the same innovative ecosystem that brought us lifesaving vaccines and therapies to combat Covid-19.”

Mr. Ubl’s comments ignore the ways the new proposal is kinder to his industry than its predecessor.

The industry’s messaging “doesn’t scale down, even though, in fact, the innovation incentive changes would be less,” said Rachel Sachs, a law professor at Washington University in St. Louis, who studies drug policy. She said delayed negotiation was likely to mean less harm for early stage development, and noted that many of Medicare’s most expensive drugs have been on the market for years, meaning such negotiations could still make a difference.