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.