Are Price Controls Disrupting Clinical Trials and Stifling Medical Innovation

Are Price Controls Disrupting Clinical Trials and Stifling Medical Innovation?

Source: Onco’Zine

The Inflation Reduction Act of 2022 (IRA) covers new and reinstated tax laws that will affect individuals and businesses. Through IRA, President Joe Biden delivered on his promise to lower prescription drug costs by allowing, for the first time, the U.S. Centers for Medicare & Medicaid Services (CMS) to directly negotiate with biopharmaceutical companies and drug manufacturers and establish a yearly cap on out-of-pocket prescription drug costs in Medicare.* [1]

The Inflation Reduction Act (IRA) includes important provisions purported to lower drug spending and improve access to medications for many Americans. And Medicare’s new ability to negotiate drug prices is expected to result in people with Medicare to have more access to innovative, life-saving treatments, and the costs will be lower for both them and Medicare.

Unintended consequences

And while pricing controls imposed by the Inflation Reduction Act of 2022 (IRS) may appear positive for patients in the short term, and is considered a step forward in improving affordability of, and access to, innovative medical treatments, I strongly believe that these controls may have unintended consequences on biopharmaceutical drug development programs and investments in the long term unless this pressure is offset by the opportunity to modernize the way clinical trials are conducted.

Without a doubt, several of the Inflation Reduction Act’s key provisions will directly impact drug pricing, leading to lost revenue for biopharmaceutical companies and drug manufacturers. And, these revenue reductions will have immediate, long-lasting consequences for biopharmaceutical R&D investment levels and portfolio strategy, which, I expect, will result in lower overall levels of innovation.

Smaller and emerging biopharmaceutical companies are struggling to overcome these new challenges. What can be done to overcome cost pressures by minimizing the expense of executing early-phase clinical trials?

Amidst these developments, I believe that there are various opportunity to help biopharmaceutical and medical device sponsors meet these challenges.

Decreasing investment appeal

A recently published report by The IQVIA Institute ** states that with the global healthcare system being re-equilibrated following the COVID-19 pandemic, the biopharmaceutical industry has resumed pre-pandemic levels of investment, pipeline activity and launch of novel medicines following record breaking levels of each in 2020 and 2021. In addition, process and technology innovations accelerated by extreme circumstances during the pandemic, are being integrated across the global drug development pipeline and implemented as operational and organizational changes that are enabling ongoing productivity gains. [2]

The IQVIA report further states that while the research and development pipeline remained flat in 2022 with ongoing oncology focus, clinical trial activity was remarkably resilient even as the pandemic stretched through 2022, with a 1% decline in non-COVID trial activity over 2021, but a restoration of pre-pandemic growth rates with an 8% increase over 2019.

In addition, the report notes:

  1. A growing share of newly launched drugs in 2022 were first-in-class, reflecting the increasing availability of novel science for patients;
  2. Clinical development productivity, a composite metric of success rates, clinical trial complexity and trial duration, rebounded in 2022, reversing a 10-year downward trend.

However, the IQVIA report also states that as technology and data advances take hold across the pharmaceutical development pipeline, productivity is being impacted by a range of trade-off effects on complexity, timing, and probability of success.

In addition a key driver impacting the industry are effects from the Inflation Reduction Act regarding the cost of healthcare by placing pricing controls on drugs. One of these effects is a potential of decreasing investment appeal in the biopharma sector, which is especially injurious to small and emerging biopharmaceutical companies who are already struggling to raise capital. [2]

Significant Change

The number of emerging biopharma companies has been consistently increasing by 4% each year for the past five years; they produced two-thirds of all new drugs in 2022. If this trend continues, emerging biopharma could account for 80% of the industry’s research and development (R&D) pipeline by 2028. [2][3]

And while this is god news, the bad news is that the biotech funding environment has experienced significant changes, with market instability impacting investor confidence. Rising interest rates have led to a decline in the previously robust biotech IPO market. Venture capital funding, especially for early-stage biotech companies, is at its lowest level since 2019. As a result, venture capitalists are focusing more on their existing portfolios, emphasizing survival over growth. [4] By lowering future profits on new innovative drugs, it lowers the amount of money and appetite for investing in future drugs.

A white paper published by the University of Southern California (USC) Leonard D. Schaeffer Center for Health Policy & Economics provides an illuminating analysis and dissection of the adverse impacts of the IRA on the biopharmaceutical industry and the future of drug development and discovery. [5]

Maximum fair prices

The IRA incorporates drug-price negotiations by granting the federal government the authority to negotiate “maximum fair prices” for particular brand-name drugs covered under Medicare Part B and Part D. This amendment modifies Medicare’s noninterference clause, permitting the U.S. Department of Health & Human Services (HHS) to directly negotiate with drug manufacturers through a newly established Drug Price Negotiation Program. The primary objective of this program is to reduce the cost of drugs by engaging in price negotiations with manufacturers for specific pharmaceuticals.

Manufacturers that decline to engage in price negotiations are subject to sizable penalties, including excise taxes and civil monetary sanctions that range from 65% to 95% of their product sales. While this might appear to be an effective strategy, it is problematic for the millions of people who do not benefit from current drugs/medicines and are waiting eagerly for new drug treatments that could help them.

According to the earlier mentioned paper published by the Leonard D. Schaeffer Center for Health Policy & Economics, certain elements of the IRA, including drug price negotiation, inflation rebates, and mandatory manufacturer discounts, are anticipated to have a substantial impact on pharmaceutical revenues. Studies suggest that by 2039, these provisions could result in a 31% reduction in profits and potentially lead to 135 fewer new drug approvals within the same timeframe. The IRA’s price-negotiation provisions are likely to discourage R&D investments in exploring new applications for existing drugs, potentially limiting the development of treatments for different diseases and impeding progress in the field. The provision assumes that the value of a drug is fixed upon launch, disregarding the evolving understanding of its effectiveness over time. New information, such as real-world clinical data and confirmatory trials, can significantly impact a drug’s perceived value.

Another key finding by USC Schaeffer is the potential reduction in generic competition, impacting the affordability of medications. Generic manufacturers typically enter the market after a brand-name drug’s patent protections expire. They offer significant price reductions, with generic entry lowering drug prices by 50% to 90%. However, the IRA’s negotiated prices for branded drugs may decrease the prices generic manufacturers can charge. This creates a disincentive for generic manufacturers to pursue the 180-day exclusivity period, which serves as a powerful financial incentive by preventing additional generic competition and allowing the first entrant to gain a substantial market share. The number of generic manufacturers has already dwindled in recent years, and with the uncertainty surrounding the extent of price reductions under the IRA, the future of generic drug manufacturing becomes uncertain as well.

A better way?

Is there a better way to help reduce the cost of bringing new drugs to market while leaving in place the market forces that have so successfully fueled innovation? Once such recent force that is still in its infancy and born out of the COVID-19 pandemic is used by the industry for greater technological solutions to improve the efficiency and efficacy of clinical trials. Much of this new technological innovation has been aggregated under the umbrella of Decentralized Clinical Trials (DCT) or hybrid clinical trials.*** [6]

The U.S. Food and Drug Administration (FDA) has recognized the significant advantages of DCTs and is looking towards broader adoption after their successful implementation during the COVID-19 pandemic. The promise of this new way of running a traditional, decentralized, or hybrid trial is to radically reduce expenditures by leveraging unified technology platforms to reduce the cost associated with recruiting and engaging patients, reducing the number of staff and systems needed in a trial.

To these ends, the FDA has recently introduced new guidance to support DCTs in researching the efficacy of investigational drugs, biologics, and medical devices. The new guidance provides recommendations to address the unique challenges for DCTs. There needs to be coordination of all trial activities across multiple locations to address the prevalent issues of design, feasibility, implementation, and analytical considerations to facilitate the decentralization of the trial.

Beyond business

I believe that this new way of running trials holds for balancing the costs with the current free market structure to produce greater solutions is very promising. And this is precisely what I seek to pursue further. But for me, this goes beyond business, it is very personal.

My painful experience of losing a child born with a rare congenital disorder and a brother with a chronic disease has been the springboard for me to apply my years of postdoctoral training at the National Institute of Health (NIH) and U.S. Food and Drug Administration (FDA) to accelerate therapies for both rare and common conditions.

The time is now

Patient travel requirements and the COVID-19 pandemic forced the demand for decentralizing clinical trials and embracing digital technologies needed to accelerate the process of bringing new medicines, including vaccines, to patients who need them over three times faster. My goals is to to focus on mitigating risks to emerging biopharma clinical trial sponsors and be a true technology partner, seeking time and cost-efficient ways to execute early-stage clinical trials with minimal risk without compromise. I’m certain that reducing logistical burdens on patients and study teams is a key to success. For example, in one instance the reduction of this logistical burden on patients and study teams (by more than 70%) has resulted in our eClinical platform being selected by a joint venture of Georgetown University Medical Center and Frantz Medical Group for a major cancer trial.

I’m convinced that the time to adapt is now. Mid-market and emerging pharma companies can achieve their pivotal clinical trial milestones with a unified trial management system that offers a high-value solution, addressing the most pressing problems in the clinical trial development process. By dramatically improving efficiency and simplifying operational complexities, solutions like Jeeva can bridge the gap in investment capital with cost-effective solutions that execute early-stage clinical trials with minimal risk without compromising quality.

Detailed guidelines

The FDA has accelerated the trend toward DCTs by highlighting their advantages and encouraging wider industry adoption. To maximize the benefits of DCTs in improving trial efficiencies, the FDA offers detailed guidance and recommendations, such as using versatile software technology to automate and synchronize trial processes and investigative functions. [7]

Solutions like Jeeva™ eClinical Cloud, which provides a purpose-built, unified SaaS platform with all the features and functionality to enable hybrid or decentralized clinical trials, empower emerging and mid-market biopharmaceutical companies when they acquire this type of technology that dramatically improves the efficiency of clinical operations including patient recruitment and retention, patient engagement, electronic data capture, and study support for investigator sites.

Together with my expert team at Jeeva, I’m eager to help emerging, early-stage, “cash-strapped” biopharmaceutical companies, with their 50% cash and 50% equity model, to achieve their early R&D milestones. I’m eager to help them execute both Phase 1 and 2 clinical trials, which is where the REAL Innovation is occurring in developing new treatment options for patients. And, while pricing controls imposed by the Inflation Reduction Act may appear positive for patients in the short term, I really don’t want the innovation cycle – to help us meet the often urgent and unmet medical needs of patients, to slow down as a result of it.

Note: * The yearly cap for out-of-pocket prescription drug costs in Medicare is set at $ 2,000 in 2025.
** The IQVIA report showed that trial complexity returned to the previous trend after an outlier high in 2021, while overall success rates improved slightly.
*** The hybrid design is an integration of a traditional randomized controlled trial with pragmatic design aspects to collect real-world data on patients. This design is expected to preserves the benefit of randomization and provides real-world outcome data while, at the same time accelerating product development and lowering the cost of data collection and patient follow-up. [6]

[1] Centers for Medicare and Medicaid Services. (2022) The Inflation Reduction Act Lowers Health Care Costs for Millions of Americans. October 5, 2022. U.S. Centers for Medicare & Medicaid Services (CMS) Online. Last accesses on August 9, 2023. .
[2] Global Trends in R&D 2023 Activity, Productivity, and Enablers. The IQVIA Institute. February 15, 2023. Online. Last accesses on August 9, 2023.
[3] Masson, G. “stunning” 4% yearly rise in R&D share has emerging biopharma dominating pipeline. Fierce Biotech. March 30, 2023. Online. last accessed on August 7, 2023
[4] Recent trends in the Biotech Funding Environment. ICON plc. Online. Last accesses on August 7, 2023.
[5] Dana Goldman, P., Joseph Grogan, J., Darius Lakdawalla, P., Barry Liden, J., Jason Shafrin, P., Kyi-Sin Than, M., & Erin Trish, P. (2023, April 19). Mitigating the inflation reduction act’s adverse impacts on the prescription drug market. April 13, 2023 Online. Last accessed on August 7, 2023.
[6] Zhu M, Sridhar S, Hollingsworth R, Chit A, Kimball T, Murmello K, Greenberg M, Gurunathan S, Chen J. Hybrid clinical trials to generate real-world evidence: design considerations from a sponsor’s perspective. Contemp Clin Trials. 2020 Jul;94:105856. doi: 10.1016/j.cct.2019.105856. Epub 2019 Oct 24. PMID: 31669449.
[7] Decentralized Clinical Trials for Drugs, Biological Products, and Devices. Guidance for Industry, Investigators, and Other Stakeholders. U.S. Food and Drug Administration (FDA) Online. May 2023. Last accesses on August 7, 2023.