State of the Union highlights America’s awkward conversation on financing the development of new medicines

Science, medicine, health care, and paying for medicines featured prominently in President Joe Biden’s State of the Union address. What I found interesting — and symbolic of the health policy dilemma facing the United States — was how these topics were disconnected in the speech.

Early in the speech, the president said, “And we’re finally giving Medicare the power to negotiate drug prices.”

Toward the end, as he was speaking of the Cancer Moonshot, he said, “Let’s end cancer as we know it and cure some cancers once and for all.”

The distance between drug pricing and aspiring to cure cancer was intentional. It created a disconnect to avoid the awkward conversation Americans need to have on how the country finances the search for new medicines.

Both of Biden’s lines will likely poll well with the public. But they are contradictory policies: One seeks to deeply discount innovative medicine; the other seeks to produce more innovative medicines. As a general rule in life, you do not get what you are unwilling to pay for.

Here’s the elephant in the room: The U.S. pays more than other countries for medicines.

There’s no question that more attention should be paid to policy solutions to improve price parity among wealthy nations. European countries, which ironically complain about drug prices, should pay more than they do. Why? Europe relies on the U.S. to generate the revenue that pharmaceutical companies need to enable research and development on new medicines, while Europeans enjoy low drug prices. Yet they have the same need to find better treatments and cures for heart disease, Alzheimer’s, stroke, and many other costly illness. But that is grist for a different essay.

What is important for Americans to know is that, while they pay a premium for prescription drugs, they also receive important benefits because they highly value cutting-edge medicine. As a result, the U.S. leads the world in medical innovation. Unlike any other country, it has built the investment climate and capacity to discover and develop the next generation of medicines. And when new medicines are approved, people are likely to have access much faster here than in countries with government-negotiated prices.

Take a look at new medicines approved between 2012 and 2021: Around 85% of them were available in the U.S., 61% in Germany, 59% in the U.K., and 52% in France and Italy, according to a recent Wall Street Journal editorial.

But what does that look like for the people who need these medicines?

A classic example comes from the United Kingdom, where the bean counters at the National Institute for Health and Care Excellence (NICE) created a crisis for cancer patients. NICE, which uses an unscientific cost-effectiveness model similar to the one used by the U.S.-based Institute for Clinical and Economic Review (ICER), would not recommend newly approved medicines based on the cost-effectiveness decisions it had made. These decisions severely limited access to new therapies for cancer patients in the United Kingdom. When the issue reached a boiling point, the U.K parliament intervened by creating a “Cancer Drugs Fund” that would pay for new cancer drugs regardless of NICE approval.

The drama over drug prices in the U.K. did not end there. More recently, biopharma companies and the U.K. government established a voluntary agreement in 2019 intended to improve access to innovative medicines. Despite having prices that are substantially lower than those in the U.S., the UK government demanded even higher discounts from the biopharma companies. The costs became unaffordable for industry and two companies pulled out of the agreement in January. More may follow.

The U.K. isn’t alone; this is a problem across Europe. Germany has gotten more aggressive by increasing its payment for all prescription medicines, and has become more punitive in areas like orphan drugs and combination therapies. The German government also extended a price freeze that has been in place for more than a decade to 2026.

And there are reports that even small and highly innovative biotech companies with complex gene therapies for rare disease patients may close operations in Europe because countries will not fairly value their medicines.

The lesson for the United States as Medicare looks to adopt price controls is that it must have consistency in policy. The lesson from Europe is that wanting to treat diseases with cutting-edge medicine at deeply discounted prices is a recipe for disaster.

Here’s the flip side of the story: The U.S. premium pricing model accelerates science and medicine and provides faster access to new medicines. The problem is that patients are expected to shoulder far too much of the financial burden.

Back to the State of the Union address. The president did discuss caps on out-of-pocket costs, particularly for seniors. This is a good thing. Co-pays should be added to the president’s “junk fee” list.

Americans should expect a patient-centered environment that encourages investment in science and provides immediate and equitable access to cutting-edge medicines. That means reinventing how health care and drug discovery are financed. A model that values patients first, accommodates the next generation of medicine, and rewards improvements in health and productivity over the long term is the key to the future.

To be truly serious about curing diseases means being truly serious about financing the incredible advances in science and medicine that have been emerging in the 21st century. This means U.S. health policy must focus on rewarding advances in science and medicine by paying for value based on long-term evidence.

As a start, the Patient Access and Affordability Project, which I direct, developed best practices in 2022 for assessing the value of new therapies for rare diseases. Rare disease communities face unique challenges that are discounted by cost-effectiveness models like those used by ICER and NICE. Those organizations use evaluations of treatments based on an average of the population, rather than the individual needs of each patient. This means treatments may be deemed to be not cost effective even if they could be life changing to some individuals. Yet recommendations by these groups sway payers’ decisions on patient access to important medicines and reimbursement practices.

The project’s best practices were designed to develop a long-term understanding of how a therapy meaningfully improves a person’s health and wellbeing, or doesn’t. Payments are based on demonstrating true outcomes that are valued by patients and their family members. The price of a therapy may shift up or down based on evidenced gathered by the manufacturer and reviewed by the payer. That is a true measure of cost effectiveness.

All Americans, regardless of political affiliation, need to challenge lawmakers and government officials to think differently about how we reward and finance cutting-edge medicine. Let’s be aspirational about cures, but prudent about the right way to pay for it.

MacKay Jimeson is the executive director of the Patient Access and Affordability Project at Patients Rising. He was previously an executive at Pfizer and an aide to former Florida Governor Jeb Bush.