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The Pelosi Plan and "Me Too" Drugs

Brian Newell
Brian Newell
November 5, 2019

Supporters of Speaker Pelosi’s drug pricing plan (H.R. 3) claim the bill will discourage the development of so-called “me too” drugs. For example, Rep. Donna Shalala was recently quoted as saying: 

“I think it actually will reduce me-too drugs … I think [pharmaceutical companies] are going to clean their portfolios. … I think that they’ll become more efficient.” 

There’s just one problem: HR 3 is designed to have the opposite effect. Under the bill, the Secretary of Health and Human Services is required to negotiate the price of certain “eligible” drugs. According to the Congressional Research Service, the bill defines an eligible drug as: 

“(1) is among the 125 qualifying single source covered Medicare Part D drugs with the greatest estimated net spending in Medicare Parts C and D, (2) is among the 125 qualifying single source drugs in the United States with the greatest estimated net spending; or (3) is a qualifying insulin product.” [emphasis added] 

In other words, HR 3 deliberately targets treatments that are “single source” or those that have no competitor on the market. These just happen to be some of the most innovative products available, such as emerging cell and gene therapies. So-called “me too” drugs would not fall within this definition. 

So what’s the likely outcome?In testimony before the House Ways and Means Committee on HR 3, Dr. Benedic Ippolito, a research fellow at AEI noted: 

“Drugs that have no competitors and have the largest values would be subject to aggressive rate regulation by the Secretary. The same is not true of drugs with at least one such competitor. Thus, the proposal could substantially depress incentives to pursue pathbreaking drugs that treat large populations, since these would be most aggressively pursued under HR 3.” [emphasis added] 

And what about “me too” drugs? Dr. Ippolito added: 

“It is entirely possible that being a second market entrant could be more profitable than bringing a novel therapeutic to market. It is worth asking whether these are the kinds of incentives we want to establish.” [emphasis added] 

So despite the claims of those who support H.R. 3, the bill likely would not lead to fewer “me too” medicines. In fact, it creates incentives that favor the development of so-called “me too” drugs at the expense of innovative products for patients without meaningful treatment options, such as those with Alzheimer’s and ALS. And let’s not forget that improving existing medicines through continued research can provide tremendous value to patients and society as well.