In a recent blog for Vital Transformation, author Duane Schulthess examines a claim made by Secretary Azar at a Brookings Institute briefing where he touts the plan – known as the International Pricing Index Model or IPI – but fails to acknowledge its full impact on biomedical innovation.
“[A]t most [the IPI] model could pull around $700 million out of the entire pharmaceutical industry’s annual R&D budget, which they boast is more than $70 billion a year right now. These savings, while very substantial for American patients and American taxpayers, cannot, therefore, possibly pull out more than 1 percent of R&D,” Azar purported.
But not so fast. As Schulthess points out in his analysis:
“[T]o assume that a good solution is targeting the most successful and needed new therapies with mandated price ceilings, often for drugs coming from innovative US companies, and then state that it will only impact 1% of R&D is sky-high rhetoric untethered from reality. … In fact, the impact on R&D and innovation globally will be devastating.”
He continued, “targeting only the most new, successful, and cutting-edge technologies for arbitrary price ceilings will have a debilitating impact on U.S. innovation and likely drive biotech firms to move to other markets. … [We] could easily see US companies having to move to Korea or Singapore if price ceilings that radically impact an innovative company’s ability to price new products are enacted.”
BIO echoed Schulthess assessment of the IPI in a recent comment letter to the administration expressing strong opposition to the model.
“[M]oving Part B from a market-based payment formula, to one based on artificially low and government-controlled foreign prices that largely ignore impacts on patient access and the development of new cures. … We support efforts aimed at improving the value of overall healthcare spending, but believe that the IPI model would do nothing to further this objective, or to foster a marketplace of enhanced choice, quality, and competition, which includes both generic and biosimilar options for beneficiaries.”
Among specific concerns, BIO warns in its letter that the administration’s draconian drug pricing proposal:
Jeopardizes access to new medicines for Medicare’s vulnerable beneficiaries;
Introduces new middlemen and complexity into providers’ delivery of critical medicines, potentially jeopardizing care to patients without reducing beneficiary costs;
Is inconsistent with the charge of CMS’ Innovation Center, and does not appropriately consider benefit to the patient; and
Reflects a broader effort to erode the value of the Medicare benefit for seniors and put patient access to care at risk.
For these reasons, the administration should withdraw the International Pricing Index model and “work with stakeholders on solutions that address the issues facing patients, including healthcare costs, without placing access to critical medical innovations at risk.”