Would lowering Medicare drug prices prevent a cure for cancer or Alzheimer’s?

The federal government’s first Negotiated Directly negotiate prices for a handful of drugs with drug companies. The new prices, announced in mid-August and set to take effect in January 2026, will help Medicare limit out-of-pocket costs for individual patients for a year for prescriptions to less than $2,000.

This historic policy was decades in the making and was opposed by “Big Pharma” until it was passed by Congressional Democrats and signed by President Joe Biden. Inflation Reduction Act of 2022.

After the policy became law, drug companies tried to block it in court. Their concern was that these “price controls” Will stifle innovation ——Recently, Republicans and policy commentators have also agreed to this and finally determined the negotiated price. As profits decrease, like Pfizer and Merck It will become more difficult to hire scientists, invest in lab space and set up clinical trials to test future drugs, the researchers said.

It’s a painful proposition: In trying to control drug prices for 67 million Medicare patients, we could inadvertently prevent the development of future potentially life-saving drugs. Even without explicitly stating it, this means we are developing a cure for cancer or Alzheimer’s disease or other intractable diseases at risk.

But there are good reasons to believe that current policies will not lead to such trade-offs any time soon. First, the pharmaceutical industry is highly profitable, and according to several key studies of the industry, these negotiated prices, while they may erode profit margins, will hardly completely suppress the incentive to innovate. Second, if we are concerned about future innovation, we should focus on Reduce drug development costs — This is actually an area where AI has great potential. By identifying the best treatment candidates early in the research process, we can speed up development and continue to reduce costs — without missing out on future breakthroughs.

The argument against lower profits usually goes something like this: Pharmaceutical companies invest a lot of money developing drugs, including some that never make it to market because they don’t prove effective. When they do have a new effective drug to sell, they need to make a lot of money to cover the development costs and then some so they can take their profit and plow more money into the next generation of drugs.

Most other wealthy countries, such as Australia and the United Kingdom, use the central role of government in their health care systems to negotiate lower prices, while Cultivate your own medical innovation sectorBut in the United States, before the IRA provision became law, prices were determined more by the free market and individual negotiations between manufacturers, private insurers, the government, and pharmacy benefit managers. Various rebates, kickbacks, and other financing mechanisms often obfuscated and inflated drug prices for Americans. As a result, the United States pays some of the highest drug costs in the world.

Americans often get priority access to new drugs because we pay more. But that priority access only works if patients can afford the drugs. But often they can’t.

But here’s the thing: The entire premise is wrong. When the Congressional Budget Office evaluated the bill before it passed, its analysts said they I didn’t expect it to be so effective. Future drug development. An analysis published in 2017 Health Affairsa healthcare research journal.

The study, by Nancy Yu, Zachary Helms and Peter Bach of Memorial Sloan Kettering Cancer Center, determined the excess price the U.S. pays relative to other wealthy countries. They called this price the U.S. R&D “premium.” They then calculated how much revenue that premium generated for the world’s top 15 drug manufacturers and compared it to those companies’ respective R&D spending.

They concluded that the average drug list price in other countries was 41 percent of the net price in the U.S. Big Pharma earned $116 billion in revenue in one year from these higher prices than in the U.S. In the same year, drugmakers spent $76 billion on research and development. These numbers suggest that drug companies can afford to avoid such premiums. “Even if the global research budget is covered, there are still billions of dollars left over,” the authors wrote.

At some point, expectations of falling revenues may start to reduce the industry’s willingness to invest in new drugs and take riskier bets that could pay off big. But are we approaching that point yet? Whatever objections these companies raise, it may be more persuasive to examine what they did rather than what they said.

Last year, Richard Frank and Luo Huang of the Brookings Institution Watched The researchers looked specifically at business decisions made by drugmakers since the negotiation clause became law. The researchers considered mergers and acquisitions, another way big pharma companies discover new drugs (usually by buying a promising startup that’s already doing research and development).

Frank and Huang found little evidence that pharmaceutical companies expected changes in the negotiation process to take a big hit to their revenues. They found an increase in drug deals in both early and late trial stages. Overall M&A spending did not change significantly, with some Recent Earnings Reports Expressed optimism about the future.

This makes sense: The IRA stipulates that Medicare’s negotiating power should be limited and phased in. In the first year, Medicare is allowed to pick 10 drugs to negotiate for. In the second year, the plan can add 15 more drugs, and in the third year, 15 more.

There are good reasons to think we can buy more drugs at lower prices. But it would be great if we could develop drugs faster, thus reducing costs. This would naturally reduce prices while still getting new drugs to those who need them. A win-win.

Perhaps there is a way to streamline the approval process and standards for more drugs. By Matt Yglesias Covers some options In his newsletter, he offered several suggestions that Congress and the FDA should consider, including being more receptive to data from clinical trials conducted in other countries, where trials can often be conducted at lower cost.

But science is the biggest hurdle facing new drug development. It takes years for researchers to even figure out how a disease works, its biological underpinnings, and thus deduce possible candidates for intervention. It can take decades to go from basic research that reveals these building blocks to FDA-approved clinical trials. Only once you find a drug that actually works does the FDA step in. That’s why big pharma spends so much on acquisitions; even with all its resources, there’s no guarantee that in-house scientists will find a promising candidate for treatment before outside researchers do.

The best way to maximize our R&D resources and get the most bang for our buck when running expensive human trials is to identify the most promising drug candidates from the outset. But we’re dealing with a vast amount of information: the genetic repertoire that every human carries. That’s why drug developers are turning to Artificial intelligence helps organize.

A leader in antibiotic resistance research There are trained computers Looking everywhere, even in the DNA of extinct animals, for molecules that might hold promise for treating bacteria that are hard to treat with conventional drugs. Have the same belief Artificial intelligence. Startups such as Recursion Pharmaceuticals STAT StatisticsCompanies like have built entire businesses around using AI to find potential drug candidates, including those for new conditions, on the shelves of big pharma companies.

Whether these AI visions will come to fruition remains to be seen. But they offer another reason for optimism.

Drug pricing discussions are often framed as either-or. Either lower prices or introduce new treatments, but not both. That’s a false choice.