Evidence to Inform Forecasts of Biopharmaceutical Policy Impact

OBJECTIVES: The Congressional Budget Office (CBO) issued a call for research to inform assessment of the impacts of major changes in drug pricing policy on clinical development for medicines. The aim of this analysis is Identify gaps in the evidence, data and methods available to understand the degree to which centralized price setting affects the level and nature of drug development, and specifically the extent to which analyses generated by the CBO and other independent forecasts allow policymakers to appropriately weigh the tradeoffs between drug prices and innovation, particularly in the context of setting prices for more and newer medicines.

METHODS: Focus group discussion and survey with economists, policy thought leaders and data analysts Q4 2023-Q1 2024.

RESULTS: Limitations were identified in the data and methods currently used to forecast the impact of administrative price setting in the U.S. These include: 1) the objective metric provided to policymakers considering federal government price setting, the count of drugs not developed as a result of the policy, offers limited evidence of the impact of a price control policy and does not consider equity of impact on different populations 2) the modeling framework used, simulation of a representative firm’s decisions does not reflect the heterogenous risk and access to capital in the prescription drug development ecosystem 3) use of the forecast and communication about its methodology does not allow for validation and leaves an impression of false precision. Opportunities for new areas of research to address these limitations are also explored.

CONCLUSIONS: To better inform CBO’s methodology and policymaker decisions new research is needed to more broadly evaluate health effects and second order impacts on costs and competition, the distinct risk profiles of firms at each state of the drug development pathway and provide transparency to allow for model replication and validation.