[Ip-health] KEI Reaction to the White House CEA Paper on Biopharmaceutical Pricing Home and Abroad

Kim Treanor kim.treanor at keionline.org
Fri Feb 9 10:28:51 PST 2018


KEI Reaction to the White House CEA Paper on Biopharmaceutical Pricing Home
and Abroad
James Love on 9 February 2018

On February 9, 2018, the Trump Administration released a paper by the
Counsel of Economic Advisers on drug pricing. The paper could have been
written by PhRMA, and relied on arguments and evidence provided by many of
the big pharma consultants, such as Joseph DiMasi, Patricia Danzon, Ernst
Berndt and others.

One extended theme in the report was that foreign countries that take
measures to curb high drug prices are free riding on the United States, an
argument that seems at odds with the possibility that the United States
would emulate those price moderating measures.

The paucity of patented medicines on the World Health Organization’s
Essential Medicines List was mentioned briefly, but in the content of
suggesting that poor people could get along with off-patent drugs for the
most part, without questioning the obvious double standard for care.

The proposals for US pricing measures were notable for both the lack of
ambition and details on implementation. The proposal to move drugs for
Medicare from Part B to Part D is an effort to avoid entertaining a role
for the federal government (the largest buyer and reimbursement agency in
the world by far) from using its power to negotiate prices. There was no
mention of measures like compulsory licensing of drug patents, as a means
of leverage to move prices down without resorting to formularies or other
restrictions on access.

The CEA report did not mention orphan drugs even once, despite the fact
that the system of incentives for the development of and prices for rare
disease treatments are obviously broken.

The discussion on transparency of drug prices needs more context and
details on implementation, particular as the report recommends a larger
role for negotiations by Medicare Part D payers.

On the lack of competition for biosimilars, the report ignores the most
important measure, which is to mandate greater access to manufacturing
know-how and materials, in order to reduce the costs and time of entry for

There was nothing in the report about the proposals to use Bayh-Dole rights
in federally funded research to lower prices, when the federal government
holds royalty free rights and march-in rights in the patents and has
directly licensed many expensive treatments to biopharmaceutical companies.

The best thing that can be said about the report is that after more than a
year, we finally have something in writing about drug prices from the Trump
Administration, and now it’s clear that the Administration has been
extensively managed by big pharma to avoid measures that would
fundamentally change prices on new drugs in the United States, and to
punish any foreign country that does challenge excessive prices. This is
disappointing content from the Trump Administration, and now we wait to see
how the Democrats will respond.

What we are waiting for are measures that would do the following:

1. Make R&D costs more transparent, so we don’t just keep seeing Joseph
DiMasi’s industry advocacy quoted in government reports.
2. Express a willingness to end legal monopolies on products when prices
are excessive. These legal monopolies are privileges and those privileges
should be eliminated when abused.
3. Overhaul the management of intellectual property rights on government
funded drugs, by limiting the use of exclusive licenses, and ensuring that
when exclusive licenses are used, prices are reasonable (as is required by
35 USC § 201.f).
4. Require manufacturers of biologic products to provide access to know-how
and materials so that when the temporary legal monopoly ends, the actual
monopoly ends.
5. Reframe the discussions over drug prices to include discussions of the
reasonableness of R&D incentives. A price is not reasonable if the
incentive provided is not reasonable. We are spending globally more than
$25 billion per year for HIV drugs, and only getting an average of one
novel drug per year over the past 30 years. That is a huge mismatch between
the costs of the incentives and the investments induced.
6. Begin serious work on new business models for drug development that
progressively delink R&D incentives from product prices.
7. Refocus trade policy on policies that support R&D investments, rather
than product prices, and promote global norms that include and do not
ignore public sector funding of R&D.

Kim Treanor
Knowledge Ecology International
kim.treanor at keionline.org
tel.: +1.202.332.2670 <(202)%20332-2670>

More information about the Ip-health mailing list