Artificially capping drug prices will only stifle access, innovation

Virginia legislators have passed in their respective chambers Senate Bill 274 and House Bill 570 — legislation that would establish, for the first time, a prescription drug affordability board (PDAB) in the commonwealth. A PDAB would give authority to a group of government appointed persons, several without biotechnology industry experience, to establish artificial price caps on certain drugs with high patient out-of-pocket costs. Virginia would be following eight other states that have PDABs in early stages of implementation, none of which have successfully executed price controls.

For Virginians struggling to afford medications and legislators seeking to alleviate such barriers, a PDAB sounds promising and is certainly well-intentioned. And yet, ironically, a PDAB would have disastrous impacts on patient access to necessary care by making it unfeasible for certain drugs to be sold in Virginia, reducing the availability of critical therapies and slashing investment in drug development. The payment ceilings placed on the price of certain drugs would limit reimbursement for treatments purchased and dispensed by local health care providers. Lower reimbursement rates do not take into consideration the cost to store and administer medications and would cause providers to limit purchasing or prescribing those drugs, particularly in more rural areas of Virginia. As a result, patients could lose access to effective treatments, leading them to potentially forgo critical health care.

The establishment of a Virginia PDAB would also threaten Virginia biotechnology companies’ ability to bring new medicines to market. Between 2018 and 2021, over $197 billion in private investment was allocated to U.S. biotech startups, including more than $1 billion invested in Virginia startups. These startups are the breeding grounds for the drugs needed to treat patients. The imposition of artificial price limits would chill such investment, as price limits would eliminate investment incentives and return on investments, causing investors to look elsewhere. The quickest way to strangle Virginia’s burgeoning pharmaceutical industry is to artificially set drug prices.

The true drivers of high out-of-pocket drug costs are numerous, including the added costs imposed by pharmacy benefit managers (PBMs) — middlemen who work between drug manufacturers and health insurers to negotiate drug costs and who decide which drugs are available under insurance plans. Legislators have recognized this substantial cost driver and introduced House Bill 1041, which would require PBMs to pass on the savings from negotiated medications directly to patients. The passage of such legislation would be a critical step to ensuring that patients see lower costs at the pharmacy counter, something that artificially set drug prices will not address. House Bill 1041 has been carried over to 2025. This legislation is a critical step to ensuring that patients see lower costs at the pharmacy counter, something that artificially set drug prices will not address.

In December, Gov. Glenn Youngkin announced his proposed $90 million investment to create “Virginia’s Research Triangle,” to grow the state’s biotechnology, life sciences and pharmaceutical manufacturing capabilities. The PDAB concept directly counters this stated desire to grow Virginia’s life sciences industry by short circuiting investment and contravenes any desire to increase access to and lower the cost of therapies and treatments. I encourage our legislators, our governor and our citizens to oppose any attempt to bring this experiment to the Old Dominion.

Read more here.

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