Medicare's Drug Pricing Proposal Raises Concerns
· science
The Hidden Price of “Progress”
A recent proposal from the Centers for Medicare and Medicaid Services (CMS) aims to accelerate medical innovation by introducing new price controls on prescription drugs. At first glance, this seems like a classic case of trying to have it both ways: supporting cutting-edge research while keeping costs in check. However, scratch beneath the surface, and you’ll find that CMS’s plan might do just the opposite.
The key change lies in how CMS plans to determine when newer medicines become eligible for government price controls. Currently, companies have a certain amount of time – typically seven years for small-molecule drugs and 11 years for biologics – to recoup their investments before Medicare can step in with its price controls. Under the new proposal, if a newer medicine shares an active ingredient with an older product, it would be treated as part of that “qualifying single source drug” (QSSD) portfolio. This means some newer therapies could become subject to price controls years sooner than they otherwise would.
This change affects not just the science but also the economics. Companies invest in improving existing medicines when they expect a return that justifies the cost. If Medicare shortens the period before price controls apply, this calculation changes. As one expert pointed out, companies will be less likely to invest in follow-on research based on the chemistry of new medicines.
The consequences are already being felt. Eli Lilly abandoned development of LOXO-338, an experimental treatment for certain blood cancers, just months after the Inflation Reduction Act passed. The company cited the new pricing provisions as a major factor in its decision to pull out – and it’s not alone. University of Chicago economists estimate that the law’s pricing provisions could result in roughly 135 fewer new medicines being developed over the next two decades.
This means patients will ultimately bear the brunt of these regulations. If companies invest less in improving existing medicines, we can expect a decrease in the quality and availability of treatments – precisely what CMS claims to want to avoid.
A larger pattern is at play here: every regulation creates incentives. CMS’s proposal would encourage one thing above all else: investing less in improving existing medicines. This is a costly tradeoff for patients – and one Medicare shouldn’t make.
Medical innovation rarely ends with a drug’s first approval from the FDA. Researchers spend years finding better ways to use medicines that already work, developing new formulations, improving delivery methods, and discovering new uses for existing therapies. For example, Opdivo Qvantig is a new formulation of Bristol Myers Squibb’s immunotherapy that reduced preparation and administration time by over 63% and direct provider costs by 17% per treatment episode. These gains require considerable post-approval work.
As policymakers move forward, they must prioritize a more balanced approach that supports both cutting-edge research and affordable healthcare. This means recognizing the long-term consequences of regulations on patients and medical innovation. Anything less would be a prescription for stagnation – and ultimately, harm to patients who depend on innovation to save their lives.
Reader Views
- TLThe Lab Desk · editorial
The proposed Medicare price controls have more teeth than initially meets the eye. Not only do they potentially stifle innovation by limiting investment in follow-on research, but they also create uncertainty for companies trying to determine when a new medicine is truly distinct from its predecessors. The article focuses on the seven-to-eleven-year timeframe, but what about products that are substantially different despite sharing some active ingredients? Don't we risk stifling progress if we over-emphasize cost controls at the expense of true advancements in medical science?
- DEDr. Elena M. · research scientist
The proposed changes to Medicare's price controls on prescription drugs may seem like a well-intentioned attempt to curb costs, but they risk stifling innovation instead. By shrinking the timeframe for newer medicines to recoup investments before facing government price controls, CMS is inadvertently discouraging companies from investing in follow-on research that builds upon existing treatments. This could lead to fewer, not more, effective therapies being developed. What's needed is a nuanced approach that balances cost control with incentives for innovation – something the current proposal fails to deliver.
- CPCole P. · science writer
The proposed Medicare price controls on prescription drugs are being touted as a way to rein in costs, but they're actually threatening the very innovations they claim to support. The CMS's plan to compress the timeframe for introducing price controls could stifle investment in follow-on research by tying up potential profits too quickly. Companies may opt out of improving existing treatments if it means sacrificing future growth, which is a shortsighted policy that could ultimately harm patients and perpetuate a lack of affordable new therapies.