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CLSA Wire

California’s Innovative Biopharmaceutical Sector Will Falter Under H.R. 3

By Dani Mitchell & Molly Fishman
Nov. 20, 2019

CLSA and Biocom recently released the findings of a CLSA-commissioned study, conducted by international health economics firm Vital Transformation, to examine the impact of using international reference pricing in Medicare Part D (as proposed in H.R. 3, the Lower Drug Costs Now Act of 2019) on California’s innovative biotechnology sector.

Key findings from the study indicate that implementing international reference pricing (also known as foreign price controls) to lower drug costs in Medicare Part D will have negative effects on both California and the entire U.S. biopharmaceutical economy. One of the most important findings is that the data differs from the non-partisan Congressional Budget Office’s (CBO) estimate that H.R. 3 will only result in a market reduction of eight to 15 drugs over ten years.

Instead, the Vital Transformation study shows, through a statistically-significant analysis of anticipated investor behavior under H.R. 3, that there will be a far greater negative impact: a significant reduction in the number of new medicines developed. Specifically, the number of new assets developed by small California-based companies alone, many of which are supported by revenue generated by Medicare Part D products, would fall from 25 to three over the next ten years – an 88% reduction. Considering that California biopharma firms received nearly 30% of the total $621 billion invested in the U.S. over the past ten years, the full impact would be much greater when looking at all 50 states and accounting for Part B revenues that are also slashed under H.R. 3.

CLSA’s Washington, D.C. team has been speaking with legislators and stakeholders to discuss the study and encourage their opposition to H.R. 3 and the concept of international reference pricing. In addition, CLSA and Vital Transformation’s Managing Director Duane Schulthess also recently met with Congressional Budget Office (CBO) to review and discuss the methodology and results of our study. CBO has not yet released a full analysis of the expected budgetary impact of H.R. 3.

Support CLSA’s efforts by sharing this study with your network and encouraging others to take action.

Questions? Please contact Molly Fishman, CLSA’s Director of Federal Government Relations (mfishman@califesciences.org).