Immerse yourself in the complex world of the US pharmaceutical industry, exploring its challenge to balance innovation and accessibility in the pursuit of better health outcomes for all
Words by Jade Williams
A real innovation hotspot, the pharmaceutical industry in the US spends around $60bn per year on drug research and development. Encompassing a huge share of the global market, representing between 30–40% of the world’s pharmaceutical spending, it comes as little surprise that five out of the top 10 pharma companies call the country’s shores their home.
This ample environment may not hold out for long, however, as the US Government seeks to strike a balance between affordable healthcare and pharmaceutical profits with the Inflation Reduction Act (IRA) set to come into effect in September 2023.
Access vs. innovation
It may seem oxymoronic that one of the global leaders in R&D and innovation struggles to provide equitable access to healthcare for its population, but the high prices that patients pay for healthcare in the US compared to similar countries has created access problems.
Shockingly, more than 100 million people in the country are burdened by medical debt, but the flexibility of drug pricing, combined with factors such as direct-to-consumer advertising, positions the US as a vital funding source for medical innovation globally. While access shouldn’t be sacrificed for the benefit of innovation, the US market needs to thrive.
America leads the world in innovation
“America leads the world in innovation,” confirms Vinod Mitta, Medical Officer, Seamless Care Models Group, Center for Medicare and Medicaid Innovation, speaking at the FT’s US Pharma and Biotech Summit 2023. For example, the country is currently leading the way in respiratory syncytial virus (RSV), with US-based Pfizer and GSK’s US arm both recently winning FDA approval for vaccines against the disease.
As a result of this home-grown innovation, patients in the US are likely to be the first to have access to a preventative treatment against RSV – the roll-out begins this autumn. Still, despite benefits such as this, finding the sweet spot between access, affordability and innovation for the US population remains a complex and ongoing challenge.
“We see this as a balance,” Mitta comments. “On one side you have innovation, on the other side you have accessibility and affordability.” Stepping back to take in the full picture, Mitta notes: “The most effective drugs are the ones patients can afford.”
The most effective drugs are the ones patients can afford
The Inflation Reduction Act
It would be remiss to explore the pharma industry in the US without exploring how recent regulatory changes are causing widespread concern for pharma companies in the country.
The Biden-Harris Administration has come up with the IRA as a way of reducing healthcare expenditure by allowing Medicare to negotiate the price of high-cost drugs. It will also lower the out-of-pocket burden on some patients for certain therapies.
While this is a landmark win for government and patients who pay out of pocket, industry concerns lie in the fact that reduced funding could hamper R&D efforts and potentially block the introduction of new drugs and therapies that could improve patients’ lives.
To this end, PhRMA, a US-based pharmaceutical lobby group, recently joined Merck and Bristol Myers Squibb in suing the government over the new regulation. They have called the move “unconstitutional” in a complaint filed in a federal court in Texas in June 2023.
Another threat posed by the IRA is the potential reduction in US mergers and acquisitions activity. These are a key driver of pharma innovation in the country, and in 2022, 784 M&A deals worth $126bn were completed globally, according to GlobalData. If profits fall, large companies looking to acquire smaller biotechs and others may not be able to do so. This is a particular challenge for the US as North American firms led the way in M&A in 2022.
Commenting on this, William Pao, Chief Development Officer and Executive Vice President, Pfizer, says that if regulation prevents this type of M&A, it could spell disaster for the sector. “In big pharma, we can’t work on everything,” he notes. Taking a specialist company under its wing can be a huge advantage in driving new and life-changing discoveries.
In big pharma, we can’t work on everything
Finding a balance
As the industry awaits the outcome of the ongoing legal battles surrounding the IRA, it is clear that the US sector is at a fork in the road. It is being challenged to still deliver innovation through the US market while finding a way to offer a better deal to its population.
Also speaking at the FT event, Robert A. Bradway, Chairman and CEO, Amgen, believes that there needs to be greater focus on encouraging the development of preventative measures rather than recouping profits from existing treatments. If the industry can prevent more disease, the burden on healthcare spending will naturally fall, he argues, and says it is crucial “not to pretend that these are two separate costs”.
Fundamentally, the future health of the US pharma industry hangs in the balance. “We want more innovation,” says Bradway, but many companies argue that the threat of the IRA makes this a difficult prospect. At the moment, tensions seem to be rising rather than being resolved, but the clash was inevitable and the debate needs to be had. Will the situation be resolved and a happy medium found for all parties? Only time will tell.
