PhRMA Takes Aim at Medicare Price Negotiation as HHS Digs In

Policies aimed at slowing price growth in the most expensive drug categories could result in slightly fewer drugs coming to market, according to an analysis of the issue prepared by the Congressional Budget Office (CBO). While the pharmaceutical industry has used the report to back up its longstanding claims that drug development would be irreparably harmed by federal intervention on prices, employer plan sponsors and other payer groups insist that the impact of drug pricing policies on drug development would be marginal at most.

“The model uses estimates of changes in expected future profits or development costs to estimate the percent change in the number of drug candidates entering the various stages of human clinical trials,” the report says. “The paper considers a legislative change that lowers expected returns for the top-earning drugs. A 15 percent to 25 percent reduction in expected returns for drugs in the top quintile of expected returns is associated with a 0.5 percent average annual reduction in the number of new drugs entering the market in the first decade under the policy, increasing to an 8 percent annual average reduction in the third decade.”

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