CLSA Statement on “Lowering Drug Prices by Putting America First” Executive Order issued 9/13/20

September 14, 2020 (South San Francisco)

“The California Life Sciences Association (CLSA) is profoundly disappointed by the Administration’s decision to move forward with the flawed concept of a ‘Most Favored Nation’ policy that threatens the innovative life sciences ecosystem and patient access to cutting edge biomedical advancement.

The last thing we should be doing while innovators in California are working around the clock to combat the COVID-19 pandemic – while simultaneously conducting R&D into treatments to provide hope for patients and families battling other diseases – is threaten both this lifesaving work and high-paying jobs in our already weakened economy.

In 2019 CLSA commissioned a study, from international health economics experts Vital Transformation, and released results that demonstrated the impacts of a similar foreign price controls scheme in H.R. 3 would have had on California’s biopharmaceutical ecosystem. The analysis conclusively shows that implementing foreign price controls in Medicare Part D would have resulted in an 88 percent reduction in the prior decade in the number of new medicines developed by small and emerging California-based companies. The study also estimated that the enactment of this policy would have resulted in the loss of at least 80,000 biopharmaceutical sector jobs nationwide. We are deeply concerned about the negative impact the President’s Executive Order will have on our ability to create life-saving innovations and provide good paying jobs – as the current proposal applies to both Medicare Parts B and D.

American innovation in the life sciences leads the world, and California is the tip of the spear. Investment into this innovation is critical. The math is simple. If drug prices are set arbitrarily low, based on what is paid by governments in foreign countries who spent nothing developing these products, then the ability to attract new investment within the United States virtually disappears. This is especially true for rare diseases, or diseases with smaller patient populations.  What does not change is the amount of time, and money, it takes to develop a new drug.

The Administration is not wrong that healthcare needs to be reformed. They are not wrong that Americans are frustrated by the opaque nature of our healthcare system.  They are not wrong to highlight the frustrations of many about prices, delays, insurance red tape, and other roadblocks to delivering high quality affordable care to the patients who need it.

What the Administration is wrong about is what effect the ‘Most Favored Nation’ policy will have. It will not lead to lower patient out-of-pocket costs at the pharmacy counter, but it will certainly curtail investment into life-saving innovation at a time when the world is depending on the American can-do spirit to bring us out of this crisis.

There is a right way to address these issues and a wrong way. The right way reduces out-of-pocket costs, improves access to new medicines, and allows the United States to remain the global leader in innovation. The wrong way leads to price controls, weakened intellectual property protections, and restricted access to medicines, not to mention stifling innovation and doing little to make drugs more affordable.

On behalf of California’s life sciences innovators, a sector with more than 3,700 firms employing almost 1 million Californians, CLSA stands ready to work with the Administration and Congress to find solutions that support our continued leadership in life sciences innovation and meaningfully delivers affordable, accessible, and innovative therapies for patients and their families.”

Mike Guerra, President and CEO, CLSA