State policymakers can protect American innovation and help Americans live longer, healthier lives

For the second year in a row, life expectancy is on the decline in America. The leading causes of death across the United States include cancer and chronic diseases. Even when patients are able to manage these conditions — e.g., overall cancer survivability has increased 33% since 1991 — their quality of life may still be diminished.

To turn that tide, we need new treatments and cures that both extend life and improve it. Fortunately, America’s biopharmaceutical research companies are working to find innovative solutions that can help patients across the United States.

Company-sponsored clinical trials for medicines are happening across the country every day, helping move us closer to a world where we can live longer, healthier lives. There are currently more than 200 medicines in development for heart disease. And CAR-T is arming the body’s own cells to fight cancerous tumors, with several approved treatments already and other medicines in development that target previously untreatable cancers.

We need this type of innovation to adequately address these leading causes of death. But we also need to address the leading reasons why patients can’t access and afford these innovative treatments. 

Right now, more than half of every dollar spent on medicines goes to the supply chain — not the companies who research and develop the treatments. Plus, while patients’ out-of-pocket costs continue to rise, the prices middlemen — including insurers, pharmacy benefit managers (PBMs) and hospitals — paid for brand medicines increased just 1% in 2021. 

While these middlemen get discounts on medicines ($236 billion in 2021), too often, they fail to share the savings with patients and pocket the difference. They do that by subjecting patients to coinsurance and deductibles based on the list price of the medicine rather than the discounted price they paid.

In 2021, commercially-insured patients with deductibles or coinsurance taking brand medicines spent 500% more out of pocket than patients with just copays. That’s not fair.  

Recently, Congress exacerbated this problem with government price setting. The Inflation Reduction Act (IRA) included policies that force biopharmaceutical companies to be more selective about where to focus research and development. Worse, it specifically discourages companies from taking the biggest research risks.

Take cancer, for example. More than 60% of oncology medicines that were approved a decade ago received new indications. Most of those additional approvals happened at least seven years after the medicine was first approved by the U.S. Food and Drug Administration. The law Congress passed last year deters companies from doing this type of research, because it allows the government to set the price for a medicine before companies have adequate time to conduct the R&D.

For biologics like shots and infusions, that clock starts at 13 years post approval. For small molecule treatments like pills or tablets, the clock starts even sooner: just nine years post approval.

Companies are already saying they’re going to make hard choices. A recent survey of PhRMA member companies on the impact of the price-setting parts of the IRA included the following key takeaways:

• 3/4 of those surveyed said the IRA creates significant uncertainty for R&D planning.
• When asked if they expect to shift R&D investment away from small molecule medicines, 63% of those who responded to the question said yes.
• 82% responded that they see substantial hits to critical therapeutic areas, specifically many chronic disease treatments that require large trial sample sizes, such as cardiovascular disease and cancer.

And while the law does some important things to lower seniors’ drug costs, such as creating a cap in Medicare Part D, Congress missed the mark on lowering out-of-pocket costs for most patients as only a small percentage of seniors will benefit. Many patients struggling to access and afford their medicines will still be dealing with headaches from coinsurance and high deductibles.

State lawmakers can take a more meaningful approach

State policymakers don’t have to follow in the footsteps of Capitol Hill. Instead of pushing for additional government price-setting policies like prescription drug affordability boards that assign bureaucrats the power to arbitrarily set medication prices, state leaders have the chance to accurately diagnose this problem without sacrificing access, innovation and jobs.

First, we must ensure that PBMs operate in a way that benefits patients. Government agencies, economists and other experts have already noted that the current model may create misaligned incentives, as PBMs may favor medicines with high list prices and larger rebates to maximize their revenue. This is, in part, because there are no requirements that PBMs share their negotiated rebates and discounts with the clients they claim to serve: health insurance companies, employers, state agencies and most importantly, patients. State policymakers can act to fix this problem by requiring that PBMs get paid a fee based on the value of the service they provide, not the value of the medicine.

State policymakers can also take the important step of requiring PBMs to act in the best interest of their patients and health insurance clients. There are currently no protections holding PBMs accountable when their financial interests conflict with the interests of patients or other entities the PBMs claim to serve. Protecting patients over PBM financial interests in state law could help eliminate barriers and other delays preventing patients from getting the therapies they need.

Several states have already acted to help patients pay less, but more needs to be done. These solutions improve patient affordability while protecting American leadership in the development of these life-saving medicines given the active implementation of the IRA. Here are five ideas:

1. Share the savings: If insurance companies and middlemen don’t pay the full price for medicines, patients shouldn’t have to either. These rebates and discounts should be directly shared with patients at the pharmacy counter. West Virginia is already leading the way for patients in their state, having signed related legislation into law in 2021.
2. Make coupons count: In some cases, health insurance companies are not allowing the coupons manufacturers provide to patients to count towards deductibles or other cost sharing requirements, meaning patients could be paying thousands more than they should be. New York, Maine, Washington and Delaware saw the need to end this practice and passed legislation in 2022 to help ensure that their patients get the full benefit of programs meant to help them access their medicines.
3. Offer lower, more predictable cost sharing solutions: Patients should have more choices when it comes to their medicine coverage. Every state should require health insurers to offer at least some health plan options that exclude medicines from the deductible and offer set copay amounts for all medicines. Illinois saw the need for more options in 2021, taking legislative action to support patients and require plans to provide at least some plans with only flat-dollar copayments for medicines during the entire benefit year. This gives patients relief from plans that pocket rebates and that force them to pay an amount based on the full list price of their medicines.
4. Cover medicines from day one: In 2022, policymakers in California considered legislation to help patients from day one by requiring all plans to cover certain medications used to treat chronic conditions with no deductible. Another step would be to mandate insurers offer some plans that cover all medicines from day one.
5. Cap patient cost sharing: High cost sharing is a barrier to prescription medicine access, especially for patients with chronic, disabling or life-threatening conditions, who shoulder the largest share of the burden. Not only does Colorado require insurers to offer some copayment-only plans, but the state also caps copays for certain drug tiers.

Many of the main drivers of lower life expectancy and decreased quality of life are diseases that we’re on the verge of addressing with biopharmaceutical innovation. And it is being done right here in the United States thanks to the policy environment we’ve had for decades that have fostered this type of innovation.

Now that policy environment is at stake. We need to protect this innovation to improve the health and longevity of Americans across the country. State policymakers can take the lead and help patients pay less and get more out of life.