Innovation or Bust

That Gallup’s most recent ratings of sectors’ favorability puts pharma at a net negative 31 — even below the federal government, oil and gas, electric and gas utilities, and, yes, lawyers, too — is no reason for policymakers to destroy the innovation engine that brings enormous benefit to Americans and humankind globally. Whatever pharma’s mistakes on the PR front — leading to the single topic on which President Trump and Speaker Pelosi seem to agree — they should not be held against it, especially at this unique moment in global history when our 20th century miracle of overall longevity needs profoundly to be transformed to 21st century healthy longevity.
While it’s nice that Americans hold in good favor restaurants, travel, and even retail, the treatments for viral, cancers, or mental health conditions will not come from your local diner or a fun trip to Disneyland. And, as we age, there will be an explosive need for therapies that can also positively affect the conditions of aging to enable greater functional ability and therefore more independence, better health, and happier aging. Think of vision or hearing loss, which need not be considered natural outcomes of aging, but are health conditions that can be mitigated or cured with the right innovations. Or consider the people living with HIV who, through modern pharma innovation, are now growing old, and who will need even more the benefits of ongoing pharmaceutical innovation as they, too, age with co-morbidities like the rest of us.
But all the toying, formally known as “redesigning” of Medicare Part D — which federal legislators can do with impunity because of the negative favorability of the pharma sector — will destroy this innovative engine. It will destroy this American gem that is at the leading edge of fueling healthy longevity around the world. This will make it far less likely, as we enter what will become the WHO and UN Decade of Healthy Aging starting next May, that we, in America and globally, can turn our 20th century longevity miracle into the 21st century miracle of healthy longevity.
So, Speaker Pelosi, Mr. President, Senators Grassley and Wyden, as you consider your redesign of Medicare Part D, know that you are playing with fire — by forcing lower prices through tougher negotiations, trying to pick winners and losers through some arbitrarily more favorable treatment of certain therapies than others, and, for good measure, manipulating sensitive and delicate market mechanisms.
The pharma sector today does have a finely designed set of mechanisms built on a pricing and IP model that has been at the center of the miraculous innovations of our time. This model has produced new treatments for cancer; transformed certain death sentences such as for HIV/AIDS to manageable illnesses; and enabled prevention and wellness as in vaccines for children and adults. There’s good reason that the once world-leading German pharmaceutical sector is no longer; Japan’s pharma companies have never really broken out of their home market; and the UK pharma industries’ hopes rest in large measure on their opportunities in the American marketplace.
As politicians fiddle with the pharma market, pining for the lower-priced equivalents they superficially want to observe in other countries, they might also consider the unintended consequences of stifling innovation. Pharma these days is an easy target. And even easier when these very same politicians play favorites in the market. If this proposal goes through, it will do to our American system what reference pricing did to Germany, constant and forever price controls are doing in Japan, and the health technology favoritism does in the UK.
Instead, the policy solution to lower drug prices is hiding in plain sight: it’s the IP-Generic model we already have, rewarding the innovator for a short, defined period of time and then offering to any and all takers the ability to jump into the market at lower prices by multiple margins. If you’re looking to do something, make sure this IP-Generic model is robust and working. The overall costs of drugs to our system and to people will go down. This is particularly true in a sector where the purchase and use of the product — an HIV treatment, for example — is not a one-time event, but a chronic, multi-year experience. Over that set of years, sometimes decades, prices go down dramatically.
At the same time, we will maintain the uniquely American incentives for innovation — exploding in demand and need as our population ages.
