Biomedical innovators are developing new autoimmune therapeutics - insurance reform will ensure new treatments and cures are accessible and affordable.

Biomedical innovators are developing new autoimmune therapeutics - insurance reform will ensure new treatments and cures are accessible and affordable.

An independent and autonomous FDA is a key part of ensuring that the biotech innovation ecosystem can continue to thrive. As an agency, it is the gold standard globally for determining risk-reward benefit in therapies for patients, and the world looks to it to lead the way. The people at the FDA are trying hard to make sure that we actually make progress, and their work is a service to the American public.

America is the global leader in biomedical innovation because it has a market that values new medicines. When other countries pay less, they are free-riding on our willingness to pay for new treatments. Forcing drug manufacturers to charge the same price that these other countries mandate would backfire. Instead, policymakers should use trade negotiations to pressure other wealthy countries to pay their fair share.

When assessing the viability of an investment, investors attempt to calculate the business’s or product’s net-present value (NPV). The NPV combines a project’s likelihood of success with an estimate of the money it may make over time to determine its present value to investors. The price-setting provisions of the IRA reduce the NPV of any drug candidate at launch by 40%. If investors aren’t confident they will earn a return on their investment, they won’t invest in new drug candidates, and most ideas will never leave the laboratory.

CBO’s ability to correctly model investor decision-making is vital to our country’s ability to establish policies that achieve lasting biomedical affordability and continued innovation. In support of CBO’s efforts to improve its model, this letter emphasizes a number of economic and financial first principles, notably that investment is incentivized by expected returns based on discounted profits, not revenue, and adjusted for expected dilution from financings.

Drug development is costly. Who takes the risk and funds the hope of new medicines? Investors do. How do they know which ones will work? They often don't.

Under the drug pricing provisions of the Inflation Reduction Act, small molecule treatments will face Medicare “negotiation” (price setting) that makes brand medicines functionally generic just 9 years after FDA approval. This policy will unwisely skew investment towards harder to manufacture biologics and away from small molecule treatments for diseases of aging. Without both kinds of medicines, we will all be worse off.

33 investors whose funds manage $86B in capital detail the ways in which the imbalanced price setting provisions in the Inflation Reduction Act will warp investment in research and development and lead to fewer new cures.

This slide deck contains a powerful visual illustration of the biotech industry’s race to find a cure for Hepatitis C. Run through the slide deck quickly to appreciate the sheer level of hustle that won the world a cure, and then more slowly to appreciate every move in the chess game of mergers & acquisitions.