In their April 9 op-ed, “Big Pharma’s high prices don’t drive innovation,” Avik Roy and Gregg Girvan argued that Medicare’s new authority to demand lower prices from drug manufacturers will not result in the development and approval of fewer new drugs. Because most biotech innovation comes from smaller firms, they wrote, reducing revenue to Big Pharma will have minimal impact on drug creation.
No one contests that most pharmaceutical innovation begins with start-ups, often working on a single promising compound. But the ability of these start-ups to attract essential investment is inseparably tied to the lifetime revenue a successful new medication will generate. The business model of most start-up biotech companies is not to become the next Pfizer. Rather, it’s to develop a new drug to the point at which a major player in the market deems an acquisition or partnership with the developer worthwhile.
Start-ups have no expertise in shepherding a drug through what Mr. Roy and Mr. Girvan acknowledged are extensive clinical trials and a complex Food and Drug Administration approval process — or in manufacturing and marketing. Big firms do, and their expertise in navigating those processes matters. The potential revenue stream from a new drug, which price controls would diminish, determines the value of a start-up in an acquisition or partnership. That potential value, in turn, drives the calculations of venture investors — without whom innovation cannot proceed.
In reaching their sanguine conclusion, Mr. Roy and Mr. Girvan underemphasized these essential steps and the benefits that come from an ecosystem that includes both small, nimble start-ups and larger firms that can navigate the process of making sure drugs are safe and effective before bringing them to market.
Indeed, the evidence-based economic analysis I led with my University of Chicago colleagues — which predicted the loss of 135 drugs over the next two decades and an additional cut in 109 post-approval FDA indications — now appears to have been too conservative. Dozens of publicly traded biopharmaceutical firms have announced pipeline impacts on earning calls, blaming the Inflation Reduction Act. Such earning call announcements face criminal penalties if they turn out to be false.
Tomas J. Philipson, Chicago
The writer is Daniel Levin professor of public policy studies emeritus at the University of Chicago and a former member and acting chairman of the White House Council of Economic Advisers.
Avik Roy and Gregg Girvan’s op-ed explained why Big Pharma’s excessive drug prices are not a result of their investment in the development of new drugs. What the piece neglected to mention, and what similar articles also ignore, are the pharmaceutical industry’s huge expenditures on advertising, which do help explain those prices. In 2023, pharmaceutical companies spent more money on advertising than any other industry except for packaged consumer goods, more even than the tech companies that previously occupied second place. That annual spending rose $17 billion in the past decade — from $1 billion annually in 2013 to $18 billion last year. The United States and New Zealand are the only industrialized countries that allow companies to advertise specific prescription drugs directly to consumers. Why? Is there any public health gain to be made from being told over and over that we should ask our doctor to prescribe something with an exorbitant price tag that we might or might not need? I suspect that drug prices, as well as demand, would decrease significantly if our government joined other countries with much lower drug prices in prohibiting this barrage of advertising.
Barbara E. Taylor, Arlington
When discussing prescription drug pricing, it’s worth looking at how Albert Bourla, the head of Pfizer, described the process in his book about the development of the coronavirus vaccine, “Moonshot.” He wrote that the algorithm used to put a cost on drugs determines the cost savings in medical expenses to the government and society from the benefits of the drug. For example, if drug trials reveal that the average result of taking the drug is a patient avoiding a lengthy hospital stay, then the price of the drug should be equivalent to the cost of that stay. Mr. Bourla wrote that maintaining control of intellectual property and reaping its benefits are key to encouraging continued innovation. Because U.S. medical costs have risen rather than fallen, so, too, have the prices of drugs during those initial patent periods. This approach should be subject to more scrutiny if we, as a society, want to address drug pricing.
John Durning, Bowie
I enjoyed Avik Roy and Gregg Girvan’s op-ed on drug prices and innovation with a focus on small companies that are the force driving research and development of new drugs.
But I think two of their assumptions about the relationship between prices and innovation are mistaken. The first regards how investment decisions are made. Investors make the decision as to which drugs to bring forward based on a present value calculation, which takes into account market size, market price and other factors — such as project risk based on similar classes of drugs that have been tested in the past. If market prices are negotiated downward, present values fall and drugs that are on the bubble might not be funded. It is heartbreaking when a good drug idea fails because there is no business in developing and manufacturing it.
The larger problem with Mr. Roy and Mr. Girvan’s piece is that they imply that drug prices are unfairly high. Yes, there are individual cases of price gouging — the 2015 decision by a drug company to charge $750 per pill for pyrimethamine, an old, generic drug used to treat toxoplasmosis and malaria, is an excellent example. But prescription drug prices have made up a fairly stable share of health care spending for years.
This is not news to politicians who have been leery of lowering drug prices because they know that killing the goose that creates lifesaving drugs is not a winning idea at the polls. Patient interest groups vote, and they remember who helped bring treatments to them and who did not. And so do investors.
Stuart Gallant, Belmont, Mass.
Focus on patients, not profits
Regarding the April 6 front-page article “Algorithm impairs care, senior-home staffers say”:
Thank you for your excellent article about how for-profit health care affects health-care quality. The incentives are aligned toward profit and not toward quality of care.
Ten years ago, my husband was admitted to a memory care unit in Columbia, Md. The cost was $7,000 per month. He had been there 10 days when I found urine burns and a sacral bedsore. I brought him home and cared for him myself. He lived for six more months and died without bedsores or urine burns.
If the stockholders are winning, the patients are losing.
Pam Foster, Ellicott City
Not only do the nursing home algorithms such as the ones described in The Post on April 6 fail to provide adequate staffing for discrete resident care tasks; but they also fail to consider the importance of allowing time for the staff to chat with the residents and treat them as actual people. No wonder people are reluctant to move into assisted-living facilities. It’s self-defeating to chase efficiency at the expense of a larger business or of human decency.
Cathy Winer, Washington
The Medicaid purge hits immigrant families
Many thanks to Post columnist Catherine Rampell for a candid look at the brutal reality of Medicaid “unwinding” in her April 6 op-ed “The Great Medicaid Purge was even worse than expected.” From a health equity perspective, the news is catastrophic.
Last year, 18 percent of lawfully present immigrants in the United States and 6 percent of naturalized citizens lacked health insurance; 8 percent of U.S.-born citizens were uninsured. Immigrant families are more likely to be uninsured and have unmet health-care needs than all-citizen families. And as states resumed assessing the eligibility of Medicaid recipients after a pause during the pandemic, those immigrant families faced additional hurdles to staying on the rolls, ranging from worries about translation to concerns about future immigration consequences.
The research conducted by our coalition shows those warnings were largely ignored by the states, with serious consequences for the insurance rates of immigrants. Advocates reported that most states failed to clarify that the verification process would not endanger future immigration applications and to make reenrollment processes available the languages immigrant families read and speak. Unsurprisingly, a survey of Spanish speakers in immigrant families found two-thirds of them knew little or nothing about reenrollment requirements, most had heard misinformation about Medicaid, and many had persistent immigration-related questions that would deter them from applying.
We’re not talking about undocumented immigrants here, though we strongly believe everyone should be able to get the care they need. Millions of people in immigrant families qualify for Medicaid under federal law, as U.S. citizens with immigrant family members or as lawfully present immigrants themselves.
But because of the poor policy choices Ms. Rampell detailed, as well as the additional failures specific to immigrant families, millions of eligible people — largely families of color — lost Medicaid. Our national and state leaders must not tolerate this abject failure. And if they do, we must find new leaders.
Adriana Cadena, El Paso
The writer is director of the Protecting Immigrant Families.
