Last week, I wrote that Washington's latest prescription drug pricing scheme, the Global Benchmark for Efficient Drug Pricing (GLOBE) Model, was a world of bad ideas for American patients. Apparently, I wasn't the only one who thought so.
On November 6, the Biotechnology Innovation Organization (BIO), Biocom California, and California Life Sciences filed suit in federal court to stop the Centers for Medicare & Medicaid Services (CMS) from implementing GLOBE. Their complaint raises an important question that goes well beyond pharmaceutical pricing: Just how much authority does Washington believe it has to rewrite the rules of American healthcare without asking Congress?
It's worth asking, especially given how little patients appear likely to get for all this trouble.
As I noted in my previous column, one analysis estimates that GLOBE would reduce Medicare Part B premiums by approximately four cents per beneficiary per month. That's forty-eight cents a year. Another analysis, cited by BIO, suggests that just 0.3 percent of Part B beneficiaries would experience lower out-of-pocket costs under the proposed model.
Save money? Of course. But if Washington wants to import foreign price controls, unsettle investment in future medicines, and declare victory on behalf of patients, forty-eight cents a year deserves a better sales pitch. The lawsuit makes the whole business harder to dismiss as just another pricing dispute.
CMS is implementing GLOBE through its Innovation Center, which Congress created to test new ways of paying for and delivering healthcare. That's a worthwhile mission. But testing a payment model is one thing. Using that authority to reshape pharmaceutical pricing policy by administrative fiat is quite another.
Under GLOBE, manufacturers of certain Medicare Part B medicines would face rebate obligations tied to prices in 19 foreign countries. Many of those prices reflect government restrictions and political choices about what healthcare systems are willing to spend. The model would change how inflation-based rebates are calculated for affected drugs by introducing an international price benchmark.
The plaintiffs argue that CMS has exceeded the authority Congress provided, using an experimental payment program to accomplish something far more consequential. Their complaint also raises constitutional and appropriations-law objections. Congress has already legislated extensively on Medicare drug pricing. An agency's authority to experiment should not be confused with a license to legislate. And let's dispense with the notion that this is simply another case of pharmaceutical companies complaining about their profits.
BIO isn't just speaking for pharmaceutical giants. It's speaking for small biotechnology companies that live from financing round to financing round, often betting everything on a scientific proposition that may never pan out. Promising science doesn't pay the bills while a company waits for its next clinical readout.
For them, the economics of future reimbursement matter today. A potential investor considering a new treatment for ALS, a rare pediatric disease, or an aggressive cancer has to evaluate not only whether the science can succeed, but whether a successful medicine can earn enough to justify the enormous risk of developing it. Change that calculation, and some investments become harder to make. The consequences won't appear immediately in a Medicare budget report. They'll show up years later as clinical trials that never begin and treatments that never reach patients. That's a rather peculiar definition of patient-centered reform.
While Washington shops for foreign drug prices, China is investing heavily in the biotechnology industry it hopes will challenge our own. We ought to be strengthening America's advantages in research, financing, regulation, and manufacturing. Instead, GLOBE would tie our pricing decisions to those of governments with different budgets, different priorities, and different ideas about how long patients should wait for new treatments.
America leads in biotechnology because we've been willing to make expensive bets on uncertain science. Most don't pay off. A few change medicine forever. That's the bargain, and it's served patients remarkably well. The pharmaceutical industry has plenty to answer for on pricing. But punishing scientific risk-taking isn't the same thing as protecting patients.
Washington has a bad habit of confusing savings to the Treasury with savings to patients. GLOBE is a particularly good example. Lower federal spending doesn't necessarily mean that someone receiving chemotherapy or an infused biologic pays less. If affordability is the objective, let's measure what patients actually save, rather than shuffle money between accounts and congratulate ourselves.
If Washington wants to make medicines more affordable, it might start by examining why patients so often fail to benefit from the discounts negotiated on their behalf. There's plenty of work to be done before we start importing foreign price controls.
President Trump wants America to lead in manufacturing, technology, and economic competitiveness. So why embrace a drug-pricing policy that could discourage investment in an industry where America already leads? An America First healthcare agenda ought to include keeping America first in medical innovation.
A federal judge will decide whether CMS has the legal authority to proceed. But Washington shouldn't need a court order to recognize the folly of putting future investment at risk for savings most patients may never notice.
BIO and its partners have done the country a service by taking GLOBE to court. The immediate question is whether CMS can use its authority to test payment models to impose a pricing regime Congress never expressly approved. The larger question is why Washington thought this was a good bargain in the first place.
Patients need affordable medicines now. They also need the treatments that haven't been invented yet. Washington is entitled to experiment with better healthcare policy. It isn't entitled to experiment recklessly with America's biomedical future. Especially not for four cents a month.
Peter J. Pitts, a former Associate Commissioner of the Food and Drug Administration, is President of the Center for Medicine in the Public Interest.
