Washington wants drug companies to find new treatments. But some of its pricing rules can make the next clinical trial harder to finance. That contradiction deserves more attention—preferably before a promising new use for an existing medicine is left sitting on the laboratory shelf.
Medicare’s treatment of a “qualifying single-source drug,” or QSSD, is a good place to start.
Congress authorized Medicare drug-price negotiation and directed CMS to aggregate spending across dosage forms and strengths, including new formulations. CMS groups products that share an active moiety and an FDA application holder, even when those products have separate New Drug Applications. The group generally inherits the earliest applicable approval date.
The D.C. Circuit upheld CMS’s interpretation in Teva Pharmaceuticals USA v. Kennedy, involving Austedo and its extended-release cousin, Austedo XR. The court made clear that separate NDAs do not, by themselves, create a right to separate treatment under Medicare negotiation.
Fair enough. But an extended-release version of an existing medicine is one thing. Developing that same active ingredient to treat an entirely different disease can be quite another.
Consider Apellis Pharmaceuticals’ EMPAVELI and SYFOVRE. Both contain pegcetacoplan. EMPAVELI treats diseases including paroxysmal nocturnal hemoglobinuria and is administered by subcutaneous infusion. SYFOVRE treats geographic atrophy secondary to age-related macular degeneration and is injected directly into the eye. Both are NDA products. Under the CMS framework, their shared chemistry brings them together despite rather obvious clinical differences.
The original approval did not establish that pegcetacoplan could treat geographic atrophy. That required an ocular development program, including two pivotal Phase 3 trials. Yes, some earlier nonclinical work could be reused. It should have been. Repeating work merely to satisfy a bureaucratic definition of “new” would be wasteful.
But that isn't the point. The relevant question is what still had to be discovered, tested, proven—and paid for.
Under current policy, that later approval does not necessarily start a new Medicare negotiation clock. Drugs approved under NDAs generally become eligible for selection after seven years; biological products after eleven. There are important qualifications and exclusions, and selection is not the same thing as the effective date of a negotiated price. But the investment problem is straightforward: a substantial new development program can find itself attached to a clock that has already been ticking for years.
That matters because drug development rarely happens through the Hollywood version of innovation: the scientist shouts “Eureka!,” discovers a miraculous new molecule, and medicine changes overnight.
Real innovation is usually messier and more incremental. Scientists learn something new about a mechanism. Someone asks whether an existing compound might work in another disease. Researchers find a better dose, a different route of administration or a way to reach patients who previously had no good option. Familiar chemistry does not mean familiar science. And it certainly does not mean cheap science. Someone still has to pay for the next trial.
Investors look at trial costs, recruitment time, probability of failure, competing therapies and the commercial life remaining if the program succeeds. Money earned on yesterday’s indication does not finance tomorrow’s trial by magic. A company deciding whether to pursue another indication is deciding whether to put new capital at risk against a new clinical hypothesis.
The same problem arises with additional indications pursued through supplemental applications. There may be no new brand name and no new formulation. There can still be years of clinical work and hundreds of millions of dollars at stake. When the expected return no longer justifies that cost and risk, the program doesn't necessarily become cheaper. It simply doesn't happen. That is the part of the equation CMS should worry about.
CMS should seek documented examples of these development decisions and challenge the assumptions behind them. Some programs will remain economically attractive even with negotiated pricing. Others—particularly expensive trials in smaller populations with substantial Medicare exposure—may not. A budget analysis that counts only today's prescriptions cannot capture the cost of tomorrow's abandoned clinical trial.
None of this means that every separate NDA deserves a fresh clock. It doesn't. Companies can make modest product changes that extend commercial life while adding little or nothing to patient care. Medicare should not reward regulatory gamesmanship. But CMS shouldn't pretend it has to make that scientific judgment itself. FDA already does this for a living.
For a later product, FDA can help distinguish what was borrowed from the earlier development program from what had to be demonstrated anew. How different was the disease? What new clinical evidence was required? How substantial was the development program? And, most important, did the resulting medicine provide a meaningfully different benefit to patients?
For clinically distinct later products, CMS and HHS should determine whether existing law permits a narrowly tailored separate eligibility clock. If it doesn't, Congress should consider creating one. The original product would keep its original timetable. For substantial supplemental indications, CMS should also explain how additional evidence and investment factor into negotiation. If existing law provides no meaningful way to recognize that investment, Congress should consider a targeted development incentive.
Medicare is very good at counting the savings from a lower drug price. What it cannot put neatly into a spreadsheet is the value of the trial that was never started, the indication that was never pursued or the treatment patients never got to try. The objective isn't to create another loophole. It is to stop confusing sameness of chemistry with sameness of innovation.
Peter J. Pitts, a former FDA Associate Commissioner, is President of the Center for Medicine in the Public Interest.
