We model and estimate the impacts of BBBA price reductions for 20 therapies collectively produced by 12 biopharmaceutical companies.

We find that BBBA mandated price reductions impact all 12 companies, causing an average decline in net earnings (EBIT) of 55% :
- The 25% most negatively impacted companies see reductions in their net earnings in excess of 100%;
- Six of the 12 companies see earnings reductions in excess of 70%.

These EBIT reductions would substantially reduce cashflows available for R&D partnerships and pipeline investments into drug discovery and development.

With an average 55% drop in EBIT, our model estimates that - under BBBA - only 6 of 110 approved therapies would be considered “not at risk” of cancelled development.

In the last 20 years, drug prices in Europe declined 75% relative to the United States. We believe that, under BBBA , the US would see similar price declines, and thus declines far exceeding the initial, pre-negotiation, BBBA price reductions (depending on “age” of a therapy) of between 25% and 60%

Importantly, BBBA does not address the increasing challenges posed by higher rebates demanded by PBMs, currently estimated to be at least 50% of companies’ gross revenues.

This study was funded by BIO.

• The Accelerated Approval (AA) pathway was implemented to help fight AIDs/HIV and has largely been considered a success in addressing areas of high unmet medical needs. However, there is growing sentiment from some payers, academics, and state and federal policymakers that the pathway needs to be significantly altered or restrictions applied to drugs approved through the accelerated approval pathway

• To test the impact of these changes to the pathway, Vital Transformation calculated the Net Present Value (NPV) of 93 primary accelerated approval therapies from 2001-2021 (drugs with at least one FDA-approved indication):
- The cost estimates were derived from two peer review publications by Jayasundara and DiMasi, scaled to the actual size of the FDA approved confirmatory trial in our cohort,
- An economic model was built testing the impacts of 2, 3, 4, and 5-year delays in the granting of a full FDA marketing approval to determine the NPV of any accelerated approval therapy.

• For most of the orphan conditions currently lacking treatment in the US, each condition impacts a maximum of 330 people - an incidence rate less than 1/1,000,000. Substantial changes to the accelerated approval pathway will likely render the potential development of these therapies to treat many rare diseases economically untenable.

• The Centers for Medicare and Medicaid Services (CMS) has introduced a draft national coverage determination (NCD) for amyloid-targeting Alzheimer's disease (AD) therapies which brings new uncertainties into investment decisions / ROI calculations.
• This analysis measures the potential impact of this NCD - using assumptions based on the current draft language and historical data about AD R&D trials and investment, we assume that the NCD will add 3 or more years to the time it takes for an AD asset to see any return on investment.
• Of the programs currently in development – IF the proposed NCD was in place at the time of program initiation, 93% of investments would have had negative ROI and therefore would not have likely been made.
• Furthermore, the results of our research find that many existing clinical development programs would likely be halted - this is not only true for amyloid-targeting therapies, but all AD treatments, as neurological disorders often use the same endpoint threshold when applying for CMS program participation.
• The NCD, if implemented, reduces our estimated 39 treatments with a net positive ROI to 3, with an assumed three-year delay; with a four-year delay, we find only one therapy with a positive ROI in our model.
• Finally, the NCD introduces new and material risks to the ROI calculations for potentially all products approved under the accelerated approval pathway, which is vital to supporting the development of treatments targeting high unmet medical needs and significant scientific challenges.

22 December 2021



Early in the Covid-19 pandemic, the case fatality rate was frightening. This metric represents the proportion of all known people infected with a disease who die from it. The World Health Organization initially put it as high as nearly 16% in Algeria.

Several colleagues and I at Vital Transformation began closely following the data on Covid-19 early in the pandemic. We wondered if case fatality rates might be skewed by lack of testing. We collected data on various indictors that early on were thought to be influencing the spread of Covid-19.

• Unprecedented cost increases – in an industry that already experienced serious patient access challenges in 2019, pre-US border policy and pre-COVID-19 – have put manufacturers under considerable strain worldwide.
• As a majority global plasma donations come from the United States, poorly considered, one-size-fits all reimbursement decisions will substantially increase the risk of patient access concerns and negatively impact the sector globally.
• The plasma industry is subject to many of the same pressures of other industries. As ingredient costs rise and reimbursement falls there must be a point where the viability of that industry is in jeopardy.

With US congressional proposals now advocating in favor of government price setting for prescription medicines, the impacts of historical price setting in Europe provides a robust data source to test and predict the impact of price controls in the US on the biopharma ecosystem.

• This study uses statistical and economic modeling to calculate the net impact of EU price controls upon the domestic biopharma ecosystem in Europe; US and EU prices were compared for the top 10 selling drugs in the US for each year from 2003 – 2020*, and impacts upon biopharma R&D ecosystem key performance indicators (KPIs) were measured.

• Our research shows that every 10% drop in the price of medicines in price-controlled EU markets was associated with a:
-> 14% decrease in total VC funding (10% early stage and 17% late stage)
-> 7% decrease in biotech patents,
-> 9% decrease in biotech start-up funding relative to the US
-> an 8% increase in the delay of access to medicines.

• Our model also proved robust at predicting the trend impacts of drug pricing on Japanese biopharma KPIs, which acts as a validation of our methodology; we posit that similar drops measured by biopharma KPIs in the US would be seen over time with similar price controls.

• Drug pricing controls implemented in the US would likely have an even greater impact on biopharma KPIs given its global leadership in investment and innovation.

There is a misguided perception that NIH funding, not private market investment, is largely responsible for the creation and approval of new therapies. This study tests that hypothesis by identifying patents linked to NIH grants from a single year, identifying those associated with clinical trials and approved medicines, and quantifying the public and private investments made for those investigational and approved medicines. Key findings include: 23,230 NIH grants in the year 2000 were linked – by NIH-supported patents – to 18 FDA-approved medicines by 2020. None of these medicines reached approval without significant private investment. In fact, total private investment for the 18 approved medicines exceeded NIH funding by orders of magnitude: $44.2 billion in private investment compared to $670 million in NIH funding. As industry’s share of total investment increased, so did the likelihood of approval. These findings are consistent with the substantial literature describing the complementary roles of public and private R&D funding, and the significant long-term investments shouldered by industry with no guarantee of approval – in fact just 12% of medicines in clinical development are ultimately approved by the FDA. Public policies that would seek to replace private sector investment with publicly-funded drug development or that would reduce industry’s ability to build upon publicly-funded discoveries to bring medicines to market are therefore likely to slow drug development.

The number of Americans aged 65 and older with Alzheimer´s disease (AD) is expected to more than double from 6.2 million today to 12.7 million by 2050. Currently, there are no treatments available to stop or slow the progression of the disease. At the same time, large pharmaceutical companies have already downsized investment into AD and other neurological disorders by more than 50 percent due to the associated high risk of study failure for these diseases. International reference pricing proposals (including “International Pricing Index” or “Most Favored Nation”), currently under consideration by the U.S. Congress and proposed in the previous Congress as Title I of H.R. 3, would import foreign price controls for 125 Medicare Part B and D drugs with the highest net spending based on the volume-weighted average of drug prices in Australia, Canada, France, Germany, Japan, and the United Kingdom. Previous analysis of the impact of international reference pricing estimated a 70 percent earnings reduction in 2023 for all 125 therapies that would be potentially affected by the proposed policy. The impact of international reference pricing is projected to have carryover adverse impacts on research funding for AD. Revenue generated from successful medical products is increasingly required to underwrite investment into high-risk AD clinical development programs. Implementing international reference pricing in the U.S. would sharply reduce the ability to cross-subsidize AD research, further diminishing already dwindling investments and progress in this disease area. This is the key takeaway of a new analysis by Vital Transformation in collaboration with the Alliance for Aging Research.

Numerous proposals are being considered that would use the average of pricing in other countries to control US drug prices. Proponents argue that this can be done with little impact on innovation.
Using the Lower Drug Costs Now Act (“H.R. 3”) as an example, we find that implementation of international reference pricing in the United States would:

- Reduce earnings by 62% on average for impacted companies, with one third (32%) of affected companies having reductions larger than 95% of earnings (using conservative assumptions about the impacts on prices).

- In turn, markedly reduce biopharmaceutical companies’ investments in smaller company R&D through M&A, partnerships and other arrangements.

- Reduce by 90%+ the number of medicines developed by small and emerging biotechs — 61 fewer medicines over 10 years.
- Disproportionately impact new treatments in rare diseases, oncology, and neurology.

- Create large investment ecosystem losses to smaller companies in 19 states.

- Eliminate nearly 200,000 biopharmaceutical industry jobs, and nearly 1 million jobs across the economy.

The U.S. Congress has proposed reference pricing for Medicare Part D under Congressional Bill H.R.3 with the objective of benchmarking U.S. drug pricing against an average price basket of 11 countries for the 125 drugs with the greatest net spending in the United States. U.S. drug prices were found to be 3.7 times higher on average.

This study identifies 69 medicines that would be affected by international reference pricing under H.R.3, representing 70% of Medicare Part D spending. We calculate that implementing H.R.3 would lower overall industry revenue by $71.6 billion a year, a reduction of 58% in earnings before interest and taxes (EBIT) revenue.