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.

For the last month, a debate has raged over which approach to managing the spread of COVID-19 is correct. One aspect of this debate is about the efficacy of widespread testing. South Korea and Germany have pursued aggressive testing. The Netherlands, Sweden, and the UK – at least initially – limited testing and instead sought to create herd immunity by letting the virus run its course. Which approach is better? Given the implications of getting the choice wrong, opinions towards both approaches have been strong and vociferous. Adding to the confusion, experts disagree about which of many variables are more important for explaining higher rates of morbidity from COVID19. These include the percent of a population over 65 years of age, the case fatality rate, the population density of a region, the availability of hospital beds and ventilators per 1000 population, rates of tourism, usage of public transport, and number of university students in a given area to name a few.

19 March 2020



What's the impact of Pharmaceutical Benefit Managers on US Insulin prices? In researching HR3, Vital Transformation found $2 bil in 'lost' revenue reported in Medicare Part D, but missing in audited actual sales on company balance sheets. Time to bring back the Rebate Rule?

26th November 2019



According to Secretary Azar of Health and Human Services, implementing international reference pricing (IPI) in Medicare Part B will have minimal impacts. He has stated, “These savings, while substantial for American patients and taxpayers, cannot possibly pull out more than 1 percent of R&D.” As companies traditionally spend 20% of free cash flow on R&D, we have measured the IPI impact according to industry standard metrics.

Vital Transformation projected the impact that utilizing international reference pricing for retail medicines (as proposed as part of the Lower Drug Costs Now Act of 2019, H.R.3) would have on the innovative biotechnology sector in the U.S. While the industry revenue reductions resulting from H.R.3 would harm industry innovation across the board, the analysis found that it would have an especially large impact on small, emerging biotech firms that rely on venture capital and revenue streams from the rest of the industry to finance their R&D investments. The result will be fewer medicines coming to market and available to patients.

By Sue Peschin and Duane Schulthess, 21 October 2019

Even with all of the political chatter in Washington, D.C., talk about controlling prescription drug prices is still rising above the din. Of all the proposals being batted around, one that bases prices on an international average of prices in mostly European countries has bipartisan support. This strategy, known as the international pricing index, is particularly worrisome.

First proposed by U.S. Health and Human Services Secretary Alex Azar in the fall of 2018 for Medicare Part B drugs, House Speaker Nancy Pelosi’s drug pricing plan expands it to allow the federal government to negotiate the cost of 250 prescription medicines that aren’t facing market competition. It also extends the negotiated price to insurers and the commercial market at large.

With the increasing use of accelerated regulatory tools like the Food and Drug Administration’s breakthrough designation, there are mounting challenges for European health technology assessors (HTAs) to make an accurate assessment of the long- term value and performance of many new therapies. Data presented in evidence is often extrapolated from outcomes six months or less, and what’s good enough for regulatory approval often doesn’t meet the needs for comparative effectiveness, value, and outcomes measures for HTAs. Vital Transformation’s recent BMJ publication demonstrates a novel, practical approach to harnessing electronic health records and RWE to help solve this problem. However, access to robust deidentified patient records in Europe is key.