Editor’s focus: The balance between ROI and R&D

It’s always been a balancing act for pharma/biotech, and perhaps more so than ever with very high-end therapeutics like cell and gene therapies coming to the forefront: How do you balance cost of the product with the cost required to even bring it to market through the long and arduous process of discovery, R&D/preclinical, clinical trials and regulatory approval?

And now there are rumblings from the White House that perhaps President Donald Trump might consider price controls on drugs.

Now, it’s not as if the U.S. government has never considered official policies that would rein in drug costs, particularly when it is considering the cost of running Medicare; the debate has arisen before now. And certainly, other governments that have single-payer healthcare systems tend to be aggressive in negotiating—or dictating—price points with pharma and biotech companies.

In fact, the proposed U.S. drug pricing move theoretically would use what other countries pay as a benchmark, essentially setting an international index to which the United States would hold companies with regard to Medicare prescription prices.

The concern is that such controls could dampen pharmaceutical R&D and innovation. In fact, a report released this fall by by the Information Technology and Innovation Foundation (ITIF) maintains that price controls would have a negative effect on drug development by reducing biopharmaceutical industry investment in research, thereby slowing the pace of drug discovery.

“Biomedical innovation is critical to addressing the country’s health challenges, but developing a new drug costs between $1.5 to $2.6 billion,” said ITIF President Rob Atkinson, author of the report. “Price controls and other steps to limit prices, such as weaker intellectual property protections, would lead to less R&D and would limit overall knowledge generation and sharing critical to new drug discovery.”

I don’t know what the chances are of this plan taking off. I don’t even pretend to know what the economic or scientific impact would be. But I do suspect that given the lack of a single-payer healthcare system in the United States, whatever burden the government offloads will be taken up by higher prices paid by everyone not covered by Medicare.

I suspect that is the more likely outcome of “price controls,” since I haven’t heard anything about the administration mandating that companies adhere to an international index for prescribing that is covered by private insurance or out-of-pocket payments.