America’s plan to reduce drug prices has negative consequences
“America is the piggy-bank of the pharma world,” complains David Mitchell of Patients for Affordable Drugs, a consumer lobbying group. This statement holds some truth. America is the largest pharmaceutical market globally, generating $630bn in sales in 2022, accounting for 42% of the total worldwide. Moreover, it contributes 65% of the global profits. American patients have long shouldered the burden of these lucrative returns. On average, prescription medicines in America cost two to three times more than in other affluent countries (see chart). Additionally, patients’ out-of-pocket expenses, the portion of drug costs not covered by insurance, are among the highest globally.
Executives are concerned that the new regulations will discourage innovation in small-molecule pills. In November of last year, Eli Lilly, a major American drugmaker, abandoned a small-molecule cancer drug from its pipeline, attributing the decision to the investment becoming unviable due to the new rules. During the same month, Alkermes, an Irish biotech firm, announced its intention to separate its biologics-focused oncology business into an independent company. Richard Pops, the company’s CEO, explained that the new regulations had increased the value of biologic medicines.
Another controversial provision in the law initiates the pricing clock at a drug’s launch. Typically, pharmaceutical companies introduce a new drug to small patient populations, such as those with rare conditions or late-stage diseases, who have limited alternatives, before expanding availability to others. With only nine years to maximize profits, companies will attempt to “delay the clock” by launching their drug for the largest disease areas, according to David Fredrickson, the head of AstraZeneca’s oncology division. Genentech, an American biotech firm owned by Swiss drugmaker Roche, is contemplating postponing the release of its upcoming small-molecule drug for ovarian cancer. Instead, the company may opt to wait a few years…
2023-08-29 14:28:58
Post from www.economist.com
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