Biopharma COVID-19 R&D: Appreciation Short-Lived

The COVID-19 pandemic has given us new insights into coronaviruses and the nature of viral infection and its spread across the globe.

We’ve also learned a host of other things, such as that working remotely has many attributes and, perhaps, that we don’t need as much central city office space as we thought. 

We’ve also witnessed how important and effective our biopharma industry is.

Companies marshaled their innovation prowess, focused their research and development infrastructure, and in less than one year came to deeply understand the novel coronavirus, develop a safe and effective vaccine to prevent COVID-19 (in addition to effective antibody treatments for people suffering from Covid-19) and manufacture and distribute 88 million vaccine doses in the U.S. so far. 

Indeed, biopharma companies unprecedentedly and at great financial risk began manufacturing COVID vaccines while clinical trials were still underway in order to hasten their availability if and when the shots won FDA approval.  

The quality and quantity of COVID vaccine scientific and manufacturing advances made in such rapid succession was a remarkable feat—a 2021 version of the industrial mobilization for World War II. 

The Biopharma Business: Difficult but Highly Valuable

One would think that this performance—what biopharma delivered—would translate into heightened appreciation of the industry.

Not necessarily appreciation in the sense of praise for its accomplishments, but appreciation for the value and efficacy of the biopharma business model.  

That business model is unique. It takes, on average, $2.7 billion and 10-13 years to bring a new medicine from lab concept to FDA approved drug.

It takes, on average, $2.7 billion and 10-13 years to bring a new medicine from lab concept to FDA approved drug.

Most lab concepts fail, with the few that succeed underwriting the huge R&D spend of the industry.

Private sector biopharma R&D that doesn’t appear to “pay off” often becomes the basis for later research projects that do.

For example, the mRNA technology used in the Pfizer and Moderna COVID vaccines has been under development since the 1990s for a variety of diseases, including Ebola. 

Undermining Research and Development

Unfortunately, judging from two bills before the Connecticut General Assembly, SB 842 and HB 6447, some policymakers either do not understand or choose to ignore what drives biopharma R&D and the value of its contributions to healthcare. 

SB 842, the public option bill, reconstitutes a set of problematic policy concepts that have been put forth many times before.

This year the bill doesn’t include a provision for importation of foreign-sourced drugs (three separate bills would authorize that) but, at the bill’s public hearing, that didn’t stop supporters from trying to shift responsibility for healthcare inflation to the biopharma industry.

State Partnership Plan losing money but still more expensive than average CT plan options https://t.co/iUeh7Jtllg pic.twitter.com/H40CeFxuDr

— Ellen Andrews (@cthealthnotes) February 23, 2021

Despite the fact that study upon study has shown that drug prices, as a proportion of healthcare costs, have remained remarkably stable for 75 years—consistently at about 10% of each dollar spent on healthcare—charges were made repeatedly that drug prices are a significant driver of healthcare costs.

Ninety percent of healthcare is something other than drugs—hospital stays, surgery, doctor’s visits, insurance, administration.

If drug prices were fixed at their level today, healthcare inflation would continue to rage on driven by all the other cost drivers in the healthcare equation.

Price Controls, Drug Shortages

Drug prices are addressed directly in the Gov. Ned Lamont’s drug price control bill.

Based on legislation put forth by Massachusetts Governor Baker that has twice failed to win the support of the Massachusetts legislature, HB 6447 would limit annual drug price increases to no more than inflation plus 2%.

If a drug price goes higher than that, a company would pay a penalty equal to 80% of the excess cost. 

The proposal is ill-conceived and counterproductive on at least three fronts. 

In countries that artificially set prices, shortages occur frequently, fewer drugs are available, and the newest medicines are slow to come on the market.

First, when the price of a good is arbitrarily limited, we all get less of the good.

Rent control can seem like a good idea but it results in fewer apartments and landlords who are incentivized to perform less maintenance.

Flour, gas, medicines—you name it, you fix the price you’ll get less of it.

In countries that artificially set prices, shortages occur frequently, fewer drugs are available, and the newest medicines are slow to come on the market.

Innovation Stifled

Second, HB 6447 and its price controls will stifle innovation.

Approximately only one in 1,000 research projects result in an FDA approved drug. Of projects that reach clinical testing in actual human patients, only 12% are shown to be safe and effective—and win FDA approval.

The cost of valuable but ultimately unsuccessful research projects is borne by the few drugs that do make it to pharmacy shelves. 

The cost of valuable but ultimately unsuccessful research projects is borne by the few drugs that do make it to pharmacy shelves. 

To take on risk of such magnitude, companies must have confidence that they will be able to price their products in such a way that they are able to recoup and profit from their investments.

If a better return on investment can be had tweaking cough drops or marketing “cosmeceuticals,” R&D dollars will flow in that direction.

Authentic innovation will suffer greatly, cures and treatments will be postponed or left undiscovered, but politicians will be able to say drug prices are under control.

Counterproductive Economic Development

Finally, HB 6447 makes little economic development sense.

Since companies would be limited in their ability to adjust their prices, the bill could have the ironic effect of increasing drug prices, as well as potentially making prices in Connecticut higher than in other states.

Artificial limits on price increases would incentivize companies to price their medicines higher—and higher in Connecticut—from the start.

It is hugely counterproductive to enact legislation that fundamentally ignores the very core of what fuels biopharma innovation.

Connecticut has wisely invested in biopharma—a sector with high paying jobs not easily sent off-shore and that needs our highly skilled and highly educated workforce.

It would be hugely counterproductive to enact legislation like HB 6447 that fundamentally ignores, or just doesn’t get, the very core of what fuels biopharma innovation.

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For more information, contact the Connecticut Bioscience Growth Council’s Paul Pescatello (860.244.1938) | @CTBio