Of the many drug pricing-related proposals being considered on Capitol Hill, there is one that is undoubtedly a wolf in sheep’s clothing and runs counter to much of the pro-innovation work Congress has done for patients in years’ past: a redesign provision for Medicare Part D, which was included in the Senate Finance Committee’s drug pricing legislation, to reform how Medicare pays for drug therapies.
The long-advocated-for policy would change how the Part D program is structured and establish an out-of-pocket cap for seniors at $3,100 per year. We believe an out-of-pocket cap is much needed to alleviate patients’ cost sharing.
However, it does so with a catch: forcing a new and significant financial liability on innovative biotechnology companies. The bill would require drug manufacturers to provide significant mandatory rebates to Medicare once beneficiaries reach the catastrophic coverage phase of the Part D benefit design, and new, innovative medicines can quickly push seniors past the new out-of-pocket cap.
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As a result, it would disproportionately affect innovative life science companies that have invested in the development of high-value therapies for patients. How? It would make it more difficult for companies already commercializing innovative new medicines to recoup the hundreds of millions of dollars necessary to develop a new medicine, and for those in earlier stages of development to secure the financing they need to nurture a potential new medicine through the development process.
In fact, former Food and Drug Administration Commissioner Scott Gottlieb noted that failure to fix this critical component could rapidly alter investment decisions in the life science industry. For the nation’s small biotech companies, this policy is an unwelcome and damaging gamechanger.
There’s no doubt that innovation for next-generation medicines for seniors is now at risk. And with it, Congress is taking a 180-degree turn from its recent pro-innovation work, including the bipartisan 21st Century Cures Act of 2016, which has helped promote the research and development of new treatments and cures for patients in need.
Since the Part D program was established, medical innovation has flourished, and many new therapies have been brought to market for seniors with unmet need. Yet, seniors still face a number of diverse and debilitating conditions that have few to no treatment options.
Under the Senate Finance Committee’s bill, innovative life science companies working diligently to bring new medicines to patients in need would bear the brunt of costs for Part D reform. This would create an ironic set of winners and losers: Many larger manufacturers with broad and diverse pipelines would be less affected, while smaller companies who are selling or developing highly specialized therapeutics would be held liable.
A better structure would ensure that the financial burden of a Part D benefit redesign is more evenly spread across the entire benefit, not just the catastrophic level, and the liability is shared by multiple stakeholders. Instead of disincentivizing the development of high-value medicines in areas of unmet need for seniors, lawmakers should rewrite the bill to ensure it not only rewards the development of medicines in therapeutic categories where options already exist but also in therapeutic areas where no treatment options are available.
This fall, lawmakers in Congress have a chance to get this long-overdue policy right. Destroying hope for seniors with unmet needs by unfairly disadvantaging innovative biopharmaceutical companies is not it. By re-examining and rewriting the Senate Finance Committee’s Medicare Part D redesign proposal, lawmakers can ensure seniors will have innovative treatments in the years to come.
Joseph Panetta is the president and CEO of Biocom, a member-driven organization that advocates for California’s life science industry.
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