Could Lowering Drug Prices Hamper Drug Innovation?

Happy Monday, readers.

The Congressional Budget Office (CBO)—that scorekeeper of how federal policies will affect business, the government, and the public at large—has a preliminary report out on how House Speaker Nancy Pelosi’s proposed drug pricing legislation may affect the federal budget, public health programs, and the drug industry at large.

It’s a lot to parse through. Here’s one topline takeaway: The CBO estimates the bill (which would allow Medicare to negotiate lower prices with private companies for some of the most expensive drugs) would save the federal program $345 billion between 2023 and 2029.

Now, here’s the rub, and why pharmaceutical companies will be fighting tooth-and-nail agains the legislation—the preliminary analysis also predicts a major hit to drug firms’ bottom lines and innovation in the sector.

“Although CBO has not completed its analysis of the bill’s implications for new-drug development, its preliminary estimate is that a reduction in revenues over the next 10 years of $0.5 trillion to $1 trillion would lead to a reduction of 8 to 15 new drugs coming to market,” according to the preliminary analysis.

It’s election season, and there will likely be all sorts of political messaging around drug price reforms (an issue which, based on the rhetoric at least, should be widely bipartisan). But the question of effects on drug innovation will be a major one—and look for the industry to push back hard on such proposals.

Read on for the day’s news.

Sy Mukherjee, @the_sy_guy, [email protected]

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