Risky Business: Broadening the Conversation About Drug Pricing

Imagine some friends approach you about investing in a new business. To their credit, they are brutally honest. It will take 10-15 years to achieve the first sale. Roughly 90 percent of the products in this industry ultimately fail. More than 9 out of 10 firms in this industry are unprofitable at any given time. Finally, those who are involved in this field are often the object of public ridicule and political attack.

What is your answer? Would you put your money on the line given those facts? Not a chance. Yet those are precisely the odds faced by the biotech industry, a hearty band of scientific pioneers and entrepreneurs committed to curing or treating diseases against daunting odds. As the New York Times editorial board recently observed,

We shouldn’t be surprised by any biotech’s failure. We should expect it. Biotechs by their nature offer the promise of disruptive breakthroughs and discoveries, but they’re mostly all-in propositions, based on one molecule or one test. Fail in a Phase III clinical trial — and a majority do — and you’re finished. It’s a moonshot business; companies are going to blow up.

Moonshot indeed. And when these companies do land successfully on a new cure or treatment, they produce life-changing results. That’s the reality of the biopharmaceutical industry, but this reality is almost never reflected in the public debate about drug pricing.

Concerns about the affordability of medicines are understandable. Access to biotech therapies can mean the difference between life and death. It’s not enough to develop new cures and treatments; they must be affordable for patients. Prescription drug costs do matter.

Yet much of the current dialogue about drug pricing takes place in a vacuum. The current debate usually looks at only one dimension of the issue – the price of particular drugs. At the same time, we ignore other dimensions that are equally important – what it takes to sustain the risky innovation ecosystem that led to those few successful treatments and the value that system provides to patients and society as a whole.

If we are going to truly put the best interests of patients first, then we need a more balanced and holistic discussion. How do we ensure patients can afford lifesaving medicines and at the same time keep the pipeline of innovation flowing? This is a critical question that must be answered in a holistic way.

As a society, we need to realize the value, challenges, and fragility of the biotech industry. We need to recognize that calls for government price controls or demands for more burdensome regulatory requirements will further raise the risk and cost of biomedical innovation, making drug discovery even less attractive to investors and daunting for entrepreneurs to navigate.

These government-centric steps can generate applause lines during a politician’s stump speech. But there is a reason why more biotech innovation occurs in the United States than in all other countries combined. It’s because, relative to other countries, we have embraced a competitive market environment for drug development and commercial sale. It’s not a perfect environment, but it is driven by what patients need, not by what the government “negotiates” or demands or thinks that patients need.

Further, what patients pay for prescription drugs is driven by the complexities of the pharmaceutical supply chain. Drug manufactures are only one piece of the puzzle. In fact, insurance companies, pharmacy benefit managers and other middlemen all play the major role in determining what patients pay out of pocket for prescription medicines.

As we continue to look for ways to make prescription drugs more affordable for patients, let’s put this debate into context. Regulations and rhetoric aimed at artificially forcing down drug costs will have broader consequences for the next miracle cure or treatment. Let’s move forward responsibly, recognizing that drug costs and drug discovery go hand in hand, and that how we address the former can impact the value we get from the latter.