In my last blog post, I discussed the real cost of lowering drug prices by government price controls. (The Real Cost of Lowering Drug Prices) The Biden Administration just passed the misnamed Inflation Reduction Act of 2022, which includes giving the Centers for Medicare and Medicaid Services (CMS) new powers to negotiate with pharmaceutical companies on drug prices. While some are touting this legislation as a boon to seniors because it may lower drug prices in the short run, the larger issue is its impact on the development of life-saving new drugs – which impact seniors more than anyone.

A real-life example of this impact is reported by The Wall Street Journal editorial board today. President Biden gave a speech promoting his “Cancer Moonshot” initiative and a new government health agency that he says will drive treatment breakthroughs. But the reality is his new drug policy will actually make such breakthroughs less likely, not more.

The perfect example is a new drug for treating lung cancer called Lumakras, produced by Amgen pharmaceutical company. How important is treating lung cancer? Lung cancer kills more Americans than any other cancer. The five-year survival rate is only 18.6% for newly diagnosed cancers and a mere 5% for advanced forms. While treatment advances targeting particular protein or gene mutations have improved survival odds for breast, melanoma and some other cancers, lung cancer progress has been far slower. Many cancers driven by a mutation in the KRAS gene have eluded breakthroughs and lung cancer is one of them.

The KRAS gene regulates cell growth and division and mutations are found in many tumors, including 32% of lung and 90% of pancreatic cancers. Yet the KRAS protein has long been considered “undruggable’ because its small size and smooth surface are difficult for drug molecules to block. Amgen’s Lumakras pill proves it can be done.

How successful is Lumakras is treating lung cancer?

The Food and Drug Administration approved Lumakras last May under its accelerated approval pathway for patients with advanced non-small cell lung cancer bearing a particular KRAS gene mutation. Results from early trials showed promise and this week were borne out by a late-stage trial that showed more than twice as many patients responded to the drug than they did to chemotherapy.

Only 10% of patients receiving chemotherapy lived at least a year without their cancer getting worse compared to 25% receiving Lumakras. Survival benefits were hard to assess since a third of the chemotherapy patients received Lumakras only after their disease progressed. Amgen also announced results from a separate small trial this week showing Lumakras may help patients with metastatic colorectal cancer.

This is not to suggest that this drug is a cure for lung cancer, but it is evidence of progress. Progress occurs at the margin and some patients who had what amounted to a death sentence how have hope to live. Lumakras is also much less brutal than chemotherapy. Yet the WSJ editors say the drug might not have been developed at all had the Medicare take-it-or-leave-it negotiations that Democrats recently enacted been in effect earlier. Their price controls will penalize in particular small molecule drugs like Lumakras that have the potential to help large numbers of patients. Within six years, Lumakras could be targeted by bureaucrats for price controls and the payoff on Amgen’s invested billions could vanish.

All of this is in stark contrast to President Biden’s stated desire to promote faster cancer cures. The old saying is “talk is cheap,” but not so much when people’s lives are at stake. Biden is trading life expectancy in the long run for political points in the short run. That’s a dangerous game to play.

By now you’ve probably seen the ads bragging about lowered drug prices. The American Association of Retired Persons (AARP) is promoting those ads on television, as well as on their website, AARP.org. The first page of the website boldly states, “At Long Last, Prescription Drug Price Relief.”

For those ill-informed, the AARP doesn’t represent seniors, they represent themselves – and the Democratic Party. If seniors knew the truth, they would likely be protesting against the AARP about now. I gave up my AARP membership years ago when I discovered who they really represented.

Charles L. Hooper and David R. Henderson bring clarity to this subject in an article published in The Wall Street Journal. Mr. Hooper is president of Objective Insights, a life-science consultancy, and author of “Should the FDA Reject Itself?” Mr. Henderson is a research fellow with Stanford University’ Hoover Institution and was senior health economist with President Reagan’s Council of Economic Advisers.

They say the Inflation Reduction Act of 2022, the most mis-named piece of legislation since the Affordable Care Act of 2010, has eight provisions intended to reduce future drug prices. Some observers were surely pleased that Congress gave the Centers for Medicare and Medicaid Services (CMS) new powers to negotiate with pharmaceutical companies. Hooper and Henderson say, “They shouldn’t have been. The Inflation Reduction Act won’t noticeably reduce inflation and it will do little or nothing to lower the cost of healthcare. Forcing drug companies to charge lower prices will likely lead to fewer new drugs.”

You would think the importance of new drugs would be self-evident to everyone in the wake of the new vaccines for Covid-19, which have saved thousands, perhaps millions, of lives by preventing serious illness. Of course, we’ve all heard that Americans pay higher drug prices than people in other countries. While that’s true at face value, it is only true when comparing retail prices of brand-name drugs. Very few Americans pay retail prices; most pay a fraction – a copay dictated by their insurance plan, or the greatly discounted price on popular drug apps like GoodRx or SingleCare. Most country-to-country comparisons also leave out generics. Nine of ten prescriptions in the U.S. are filled with generic drugs priced lower than in most other countries.

In many countries, the government is the sole purchaser of pharmaceuticals. For a new drug to be used, the government must buy and distribute it. This is the case where socialized medicine systems prevail. But if the government declines to purchase the drug, it is unavailable. These governments negotiate with a take-it-or-leave-it attitude. Frequently, the drug companies take it because once research and development costs are covered, it is mostly profit.

Most drugs are developed for the U.S. market. If the drug is successful in the U.S., potential sales in Europe, Japan, China, Canada and elsewhere are gravy. If a drug can’t make it in the U.S., it is usually scrubbed. Probable success in America is a necessary and sufficient condition for the development of new drugs. Hooper and Henderson give us four reasons for this:

• The U.S. is a relatively large country
• The U.S. is a wealthy country
• Negotiating prices with governments takes time, resulting in one to two years of lost sales.
• Prices in the U.S. are somewhat more influenced by market forces – until the Inflation Reduction Act

To be sure, “negotiations” with CMS is a euphemism for “take it or leave it.” If a drug company doesn’t accept the CMS price, it will be taxed up to 95% on its Medicare sales revenue for that drug. This penalty is so severe, Eli Lilly CEO David Ricks reports that his company treats the prospect of negotiations as a potential loss of patent protection for some products.

What is the cost of R&D for a new drug?

Drug research and development involves enormous fixed costs. As of 2013, the cost per new drug approved by the Food and Drug Administration was $2.9 billion. Historically, these fixed costs have doubled in real terms every nine years. So in 2022, the inflation-adjusted fixed cost per approved drug is close to $7 billion.

Needless to say, if the U.S. market doesn’t help defray that cost, the drug company won’t spend that money. Drug companies are not in the business of losing money. The inevitable result is fewer new drugs will be developed.

What is the cost of fewer drugs being developed?

With no exaggeration intended, people will die sooner. Research by Columbia University economist Frank Lichtenberg suggests that 73% of the increase in life expectancy that high-income countries experienced between 2006 and 2016 was due solely to the adoption of modern drugs. He also found that the pharmaceutical expenditure per life-year saved was $13,904 across 26 high-income countries and $35,817 in the U.S. Most Americans would pay $36,000 to live an extra year.

Hooper and Henderson conclude: “Even though the U.S. shoulders the lion’s share of global pharmaceutical R&D costs, Americans get a great deal. New drugs are a fantastic investment for humanity, and Americans benefit as much as everyone else. Whether to accept that deal and get a good outcome or reject the deal and get a worse outcome should be an easy decision.”

I’ll bet you won’t read this in the AARP newsletter, or on their website.

By now you’ve probably heard that President Biden has declared “the pandemic is over.” Is he correct or is this just another Biden faux pas?

As usual, the White House staff is in full-retraction mode. The official response was that the president was simply expressing what many Americans were already feeling and seeing and what Mr. Biden had been saying all along – that the nation has vaccines and treatments to fight the coronavirus and that for most people, it is not a death sentence. Health Secretary Xavier Becerra echoed the sentiment while getting his booster shot at a community health clinic in New York.

Others were less charitable. Eric Topol, the Scripps Research Translational Institute Director who is one of America’s leading Covid scolds, tweeted “Wish this was true. What’ve over is @POTUS’s and our government’s will to get ahead of it, with magical thinking on new bivalent boosters. Ignores #LongCovid, inevitability of new variants, and our current incapability for blocking infections and transmission.”

“We still have 400 to 500 people dying daily in this country,” said Dr. Carlos del Rio, an infectious disease expert at Emory University in Atlanta. “If that’s over, it’s a little too high to me.” Anthony Fauci, still the Biden Administration’s top infectious disease expert until his retirement in December, declared, “We are not where we need to be if we’re going to be able to, quote, ‘live with the virus,’ because we know we’re not going to eradicate it. We only did that with one virus, which is smallpox, and that was very different because smallpox doesn’t change from year to year, or decade to decade, or even century to century.”

What none of these experts is saying is that we are transitioning from a pandemic to an endemic. By definition, a pandemic is “an outbreak of a disease prevalent over a whole country or the world.” An endemic is “when an infection in a population is constantly maintained at a baseline level in a geographic area.” The most widely seen endemic is influenza. We have lived with influenza in some form for over a hundred years. Each year the influenza virus makes some changes in its structure, requiring new vaccines to account for these changes. Such is the case now with Covid-19.

The endemic of Covid is certainly not over, as evidenced by the continuing number of deaths and hospitalizations. But such is also the case every year for influenza, which accounts for between 20,000 and 60,000 deaths in an average year. These numbers have declined since the outbreak of Covid-19, probably because of under-reporting of influenza deaths and over-reporting of Covid deaths. Mitigation efforts to prevent the spread of Covid may also have had some beneficial effect on the spread of influenza.

The real question is why President Biden is declaring the Covid pandemic is over, while at the same time declaring the public health emergency is still present. The Wall Street Journal editorial board explains the answer to this question: “The reason is almost certainly money. A March 2020 Covid law enables the government to hand out billions of dollars in welfare benefits to millions of people as long as the emergency is in effect. This includes more generous food stamps and a restriction on state work requirements. It also limits states from removing from their Medicaid rolls individuals who are otherwise no longer financially eligible. The Found for Government accountability estimates these ineligibles cost nearly $16 billion a month.

“Most outrageous, only weeks ago the Administration used a separate national emergency declaration related to the pandemic to legally justify canceling some $500 billion in student debt. An Education Department Office of General Counsel memo says the pandemic and national emergency enable the Education Secretary to modify federal student aid requirements under the 2003 Higher Education Relief Opportunities for Students Act.”

So, which is it, Mr. President? Is the pandemic – and the public health emergency – over, or not? You can’t have it both ways.