In August, federal officials announced the final prices of 10 drugs that they previously selected for the Medicare Drug Price Negotiation program.
That program, which was created by the Inflation Reduction Act, gives Medicare officials substantial latitude to determine which drugs to select and where to set their prices. Unfortunately, officials are exercising that latitude in ways that disincentivize companies from finding new clinical applications for already approved drugs.
Finding new uses, or "indications," for approved medications helps save lives and provides patients with more treatment options, which often results in lower prices and fewer side effects.
For instance, let's say the FDA approves a new intravenous treatment for lupus, a severe autoimmune disease. Based on the properties of its active ingredient, scientists might hypothesize that the medicine could also treat rheumatoid arthritis, a different autoimmune disease.
Before the IRA, companies were typically eager to test scientists' hypotheses by developing and testing reformulated versions of their drugs -- perhaps in a new dosage, or even as a pill -- for different indications.
But now, federal officials are threatening this sort of post-approval research. They've decided to count all medicines that have the same active ingredient -- even if they come in different forms, treat different conditions, and were approved years apart -- as one "Qualified Single Source Drug (QSSD)" for the purposes of choosing which medications are selected for the price negotiation program.
For instance, one of the first 10 selected drugs, Stelara, comes in various forms and dosages, depending on whether doctors are prescribing it to treat psoriasis, psoriatic arthritis, Crohn's disease, or ulcerative colitis. The first approval was in 2009; the most recent, for a pediatric indication, in 2022.
The price that government officials set for each qualifying single-source drug applies to all the forms, doses, and indications of the selected medicine.
This disincentivizes companies from investing in post-approval research. Why would a company spend hundreds of millions on the clinical trials necessary to secure FDA approval for a new indication if looming price controls will prevent it from earning a return on that investment?
The resulting drawback in research and development will inevitably harm patients.
Consider what Merck's CEO recently said about his firm's miracle cancer therapy, Keytruda, which has 39 approved uses across 17 types of tumors. Obtaining subsequent FDA approvals for all those additional indications -- which makes it easier for doctors to prescribe the drug to the target patient population -- required enormous investments of time and money. The CEO warned that research on that scale would have been all but impossible had the IRA been the law of the land when the drug was initially approved.
Similarly, Sanofi developed Dupixent, originally as a treatment for allergic diseases. The drug maker found through subsequent research that the medication was effective in treating chronic obstructive pulmonary disease, or COPD, as well. Senior vice president Adam Gluck has said, "Had the IRA been in effect, I don't know that we could have afforded to take this high-risk bet to pursue this additional indication."
These examples aren't anomalies. According to a study from University of Chicago economists, the IRA's price controls -- and officials' overly broad definition of what counts as a qualifying single-source drug -- will lead to 109 fewer post-approval indications over 20 years. It now seems as if that prediction was too optimistic.
Price controls inherently restrict the supply of any good or service, whether it's oil in the 1970s or medicines in the 2020s. But by disincentivizing post-approval research, officials are compounding the IRA's damage -- and needlessly depriving patients of potentially lifesaving new uses for already approved therapies.
Peter Rheinstein, M.D., J.D., is president of Severn Health Solutions, past president of the Academy of Medicine of Washington, DC, chairman of the United States Adopted Names Council, chairman of the American Board of Legal Medicine, a delegate to the American Medical Association House of Delegates, and a former president of the Academy of Physicians in Clinical Research.
