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Begin New Search Topic Pharmaceuticals Author Fred D. Ledley

1. Considering Returns on Federal Investment in the Negotiated “Maximum Fair Price” of Drugs Under the Inflation Reduction Act: an Analysis

Author:
Edward W. Zhou, Paula G. da Silva, Debbie Quijada, and Fred D. Ledley
Publication Date:
03-2024
Content Type:
Working Paper
Institution:
Institute for New Economic Thinking (INET)
Abstract:
The Inflation Reduction Act (IRA) of 2022 contained landmark provisions authorizing government to negotiate a “maximum fair price” for selected Medicare Part D drugs considering the manufacturer’s research and development costs, federal support for discovery and development, the extent to which the drugs address unmet medical needs, and other factors. This working paper describes federal investment in the discovery and development of the ten drugs selected for price negotiation in the first year of the IRA as well as the health value created through Medicare Part D spending on these drugs. We identified $11.7 billion in NIH funding for basic or applied research leading to approval of these drugs with median investment costs of $895.4 million/drug. This early public investment provided a median cost savings to industry of $1,485 million/drug, comparable to reported levels of investment by industry. From 2017-2021, Medicare Part D spent $126.4 billion (median $10.7 billion) for these products before rebates. Excluding two products for diabetes, Medicare Part D spending was $97.4 billion and the total health value created was 650,940 QALYs or $67.7 billion (WTP/QALY=$104K) representing a negative residual health value of -$29.7 billion (before rebates). We argue that a negotiated fair price should provide returns on both private and public investments in these products commensurate with the scale and risk of these investments, with the principal return on public sector investments being the residual health value (net price) accruing to those using the product. These empirical data provide a cost basis for negotiating a fair price that rewards early government investments in innovation and provides social value for the public.
Topic:
Economics, Health, Public Health, Pharmaceuticals, and Public Investment
Political Geography:
North America and United States of America

2. Government as the First Investor in Biopharmaceutical Innovation: Evidence From New Drug Approvals 2010–2019

Author:
Ekaterina Cleary, Matthew J. Jackson, and Fred D. Ledley
Publication Date:
04-2020
Content Type:
Working Paper
Institution:
Institute for New Economic Thinking (INET)
Abstract:
The discovery and development of new medicines classically involves a linear process of basic biomedical research to uncover potential targets for drug action, followed by applied, or translational, research to identify candidate products and establish their effectiveness and safety. This Working Paper describes the public sector contribution to that process by tracing funding from the National Institutes of Health (NIH) related to published research on each of the 356 new drugs approved by the U.S. Food and Drug Administration from 2010-2019 as well as research on their 218 biological targets. Specifically, we describe the timelines of clinical development for these products and proxy measures of their importance, including designations as first-inclass or expedited approvals. We model the maturation of basic research on the biological targets for drugs to determine the initiation and established points of this research, and demonstrate that none of the 232 products modelled were approved before this enabling research passed the established point. This body of essential research comprised 2 million publications, of which 409 thousand were supported by 317 thousand Funding Years of NIH Project support totaling $156 billion. Research on the 356 drugs comprised 229 thousand publications, of which 36 thousand were supported by 42 thousand Funding Years of NIH Project support totaling $31 billion. Overall, NIH funding contributed to research associated with every new drug approved from 2010-2019, totaling $187 billion. This funding supported investigator-initiated Research Projects, Cooperative Agreements for government-led research on topics of particular importance, as well as Research Program Projects and Centers and training to support the research infrastructure. This NIH funding also produced 22 thousand patents, which provided marketing exclusivity for 27 (8.6%) of the drugs approved 2010-2019. These data demonstrate the essential role of public sector-funded basic research in drug discovery and development, as well as the scale and character of this funding. It also demonstrates the limited mechanisms available for recognizing the value created by these early investments and ensuring appropriate public returns. This analysis demonstrates the importance of sustained public investment in basic biomedical science as well as the need for policy innovations that fully realize the value of public sector investments in pharmaceutical innovation that ensure that these investments yield meaningful improvements in health.
Topic:
Science and Technology, Research, Public Policy, Innovation, State Funding, Pharmaceuticals, and Funding
Political Geography:
North America, Global Focus, and United States of America