The American pharmaceutical industry not only brings new treatments and cures to market, but also serves as a major driver of US economic growth.
Stephen J. Ubl, President and CEO of PhRMA, discusses how to balance innovation and affordability, while explaining some of the often overlooked factors that contribute to drug prices.
The President’s “most-favored-nation” policy aims to equalize U.S. drug prices to the lowest paid overseas. How would such a policy impact patients and pharmaceutical innovation?
MFN is a flawed approach that doesn’t guarantee lower drug costs or better access for patients. It overlooks the real drivers of high U.S. prices—like the role of PBMs, insurers and hospitals. According to a study by Berkeley Research Group conducted earlier this year, middlemen and others take half of every dollar spent on brand-name medicines without contributing to innovation.
Instead of importing foreign price controls, we should focus on reforms that redirect savings to patients and encourage other countries to invest their fair share in medical innovation, just as we expect them to invest in national defense initiatives. This would help level the global playing field.
MFN also undermines America’s leadership in biopharmaceuticals. One estimate suggests it could result in $2.8 trillion in lost earnings and 1.3 million fewer jobs over the next decade. It would slow the development of new treatments and increase reliance on global competitors, such as China, putting patients and innovation at risk.
We are increasingly hearing questions about the role of PBMs in the pharma supply chain. What role do PBMs play and how do they impact what patients pay at the counter? Which congressional reforms would fix those distortions fastest?
PBMs are the ones who decide what medicines are covered, what patients pay and what hoops they have to jump through to access their medicines. And today, just three PBMs—now consolidated with major health insurers—control 80% of U.S. prescriptions, reducing competition and driving up costs.
PBM’s abusive practices are most evident when it comes to rebates. While PBMs and health plans often negotiate large discounts on medicines, those savings rarely make their way to patients at the pharmacy counter. President Trump recognized this problem during his first term and proposed a rule that would effectively require rebates and discounts to be shared directly with Medicare beneficiaries, thereby lowering drug costs for millions of seniors. Although the rule was never fully implemented, the principle that rebates and savings should be passed directly to patients continues to have bipartisan support. In states that have implemented PBM reform, such as West Virginia, the data show that PBM reforms have either decreased patient premiums or mitigated any premium increases.
Another popular solution is to change the way PBMs are compensated. Today, PBM compensation is often tied to the list price of a medicine. This incentivizes PBMs to favor higher-priced medicines because the higher the list price, the more money they make. Proposals currently making their way through Congress would delink PBM compensation from drug prices, ensuring they are paid based on the value of the services they provide, not the price of a medicine.
Finally, we need to address the growing number of barriers that PBMs put in front of patients. An alarming report from IQVIA found that more than 90% of patients were initially denied coverage for their medicines in four of the five chronic therapeutic areas studied. On average, patients face two to three rejections before gaining approval for their medicine, with some facing as many as eleven or more rejections. Up to 67% of patients in the study still failed to get approval for their prescribed treatment after a year.
Initial coverage denials have become so routine that receiving approval for treatment on the first try is as rare as meeting someone without a smartphone or computer. It’s a stark reminder of how normalized—and increasingly severe—these barriers have become. Imagine waiting a year or more for the medicine your doctor says you need. For patients with serious or chronic conditions, that means a year of pain, uncertainty and feeling betrayed by a system that’s supposed to help you heal.
The 340B drug discount program is the second-largest federal prescription drug program and continues to grow each year. What’s driving growth in the program and what impact does that have on the broader health care system?
The 340B program was created to help a few safety-net hospitals provide affordable medicines to low-income and uninsured patients. Today, it has ballooned into a $66 billion program and the Berkeley Research Group projects it is on track to become the largest federal prescription drug program by 2027. However, there is no evidence that patients are seeing the intended benefit of lower prescription drug prices.
The 340B program has grown far beyond its original scope, now encompassing more than half of all U.S. hospitals, which buy medicines at a discount and then significantly mark up the price. A North Carolina investigation found average 340B hospital markups of 5.4x, with profits exceeding $13,000 per claim and some markups reaching as high as 1,000%. A separate report shows that the program costs state and federal taxpayers an estimated $6.5 billion per year due to lost Medicaid rebates. One of these 340B hospitals even bought an $8 million Super Bowl ad, which begs the question: Are hospitals actually using their 340B savings to lower patients’ prescription drug costs, or are those savings being diverted elsewhere?
Despite the 340B program being limited to non-profit entities, for-profit pharmacy chains are also cashing in. An analysis from Drug Channels Institute shows more than 33,000 contract pharmacies now participate in the 340B program and many aren’t even located in the same state as the hospitals they serve. These third parties capture $16 of every $100 in 340B revenue and currently, eleven of the top 20 Fortune companies profit from the program, none of which make medicines.
Congress should restore the program’s original intent, ensuring that only truly safety-net providers participate and require proof of how they provide meaningful care to those who need it most.
Cost is often the headline when it comes to medicines. How do you respond to critics who focus solely on the price of medicines?
Invariably, any discussion about medicines becomes a conversation about cost. And we welcome that discussion. But what is often overlooked is the crucial role medicines play in the broader health care system and our economy.
First, medicines are the only part of health care where prices decrease over time. This is driven by intellectual property (IP) protections—like patents—which not only safeguard innovation but also spark competition. New treatments often enter the market alongside at least one name-brand competitor and prices tend to fall further as additional brands emerge. After a limited exclusivity period, generics and biosimilars intensify competition, accelerating price reductions. Consider migraine treatments as an example. When CGRP inhibitors first launched, they represented a breakthrough for millions of patients. As more options became available, the cost of treatment dropped by 50%.
Today, because of our IP framework, 90% of U.S. prescriptions are filled with lower-cost generics. Medicines like statins, which help prevent heart disease—the leading cause of death in the U.S.—continue to deliver value at a fraction of their original cost because of this unique aspect of our system. There are no generic options for doctor’s visits, MRIs or hip replacements, but there are generics for medicines. This is one of the reasons medicines account for just 14% of total health care spending, on par with other developed nations. Only half of this spending (7%) goes to brand manufacturers, with the rest going to generic manufacturers and entities in the pharmaceutical supply chain.
Second, medicines don’t just treat illness; they prevent costly, avoidable care. For example, patients with sickle cell disease often endure repeated ER visits and hospitalizations due to severe pain. Medical costs to treat sickle cell disease can cost about $1.7 million over a lifetime, with the cost of pain management alone exceeding $50,000 per year. But for people like Kendric Cromer—the first person to receive an approved gene therapy for sickle cell—new, potentially curative treatments are changing that reality. These breakthroughs not only relieve patients’ pain but also reduce the need for emergency care, delivering both human and economic value.
Finally, America’s innovation ecosystem is a major driver of economic growth. It’s what enabled research hubs in Cambridge, Massachusetts and North Carolina’s Research Triangle Park (RTP) to become the envy of the world for developing breakthrough medicines, proving what’s possible with smart policy. The groundbreaking sickle cell treatment I mentioned earlier was developed in Massachusetts. And we have seen similar progress in the fight against HIV/AIDS. Gilead’s new twice-yearly injection protects 100% against HIV infection and was studied right here in America. Imagine what else we could unlock with the right policies: Personalized cancer vaccines, gene therapies that correct mutations before disease begins and treatments that could prevent or even reverse Type 1 diabetes.
Countries like China are rapidly increasing their investment in the life sciences. How is the U.S. biopharmaceutical industry approaching this global competition?
Backed by a 30-year strategy to seize industry leadership, China is offering tax incentives, supporting startups and reducing regulatory barriers to promote growth. And it’s working: China now has the fastest-growing medicine pipeline in the world. From 2000 to 2021, China’s R&D investment grew by 2,600%—nearly three times faster than the U.S.—and its share of global industrial R&D rose from 3% to 13%. Chinese companies have recently surpassed the U.S. in oncology trial starts and if this trend continues, there’s a very real possibility that China could overtake the U.S. in medical innovation by the end of this decade.
Meanwhile, the U.S. has made some policy missteps, such as government price setting through the IRA and waiving global IP protections, which weaken the very ecosystem that made the U.S. a global leader. We’re urging lawmakers to recommit to the policy framework that gave us our innovation advantage: strong intellectual property protections, a predictable regulatory environment and reimbursement policies that reward innovation.
We are standing at a crossroads: Will policymakers continue to treat U.S. leadership in biopharmaceuticals as a national economic and strategic priority, or will we cede that leadership to others? We believe that protecting innovation at home while fixing what’s broken in our health care system is essential, not just for patients, but for America’s national security and global competitiveness.
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