We should all be concerned about rising health care costs, but passing legislation that threatens Maryland’s innovation economy and weakens competition in the market is not the solution.
The health insurance industry has tried to pass so-called “pharmaceutical transparency” or drug pricing legislation in other states, including in Virginia last year. That legislation failed because Virginians know it was bad for the state’s economy and because it would do little – if nothing at all – to bring down health care costs.
At the time, The Associated Press reported: “Virginia is the latest in a number of states where health insurers have tried similar measures since last year. Those efforts have so far failed…” In fact, insurers have tried unsuccessfully to pass similar legislation in at least 10 states, only succeeding in Vermont – a state very different than our own.
As the CEO of an innovative company that started in Maryland, employs people in Maryland and, hopefully, will continue to grow in Maryland, I am concerned that this legislation will undermine Maryland’s innovation economy.
Innovative Maryland companies are taking great risks to produce new cures for patients. Maryland companies are breaking ground on vaccines for infectious diseases, including Ebola, working to save lives in Africa by preventing malaria, changing the lives of patients suffering from central nervous system ailments, like epilepsy, and leveraging technology originally licensed from Johns Hopkins University into products in pollen allergy, food allergy, cancer and animal health.
The legislation under consideration in Annapolis threatens to undo all of that effort. Not only would it create an enormous disincentive for biopharmaceutical companies to do business in Maryland, it would jeopardize the life-saving research they conduct here in our backyard.
While this bill would take a toll on innovation with burdensome regulations and reporting, it would do nothing to reduce health care costs for consumers.
As Len Nichols, a health care economist at George Mason University, recently pointed out in The New York Times, the cost to develop a particular drug has little to do with that drug’s list price and knowing that information will not keep prices down. And as manufacturers negotiate competitive rebates and discounts, the list price fails to accurately reflect what consumers ultimately pay, as well.
“The past R&D cost is really kind of a red herring,” Nichols stated. “The current revenue doesn’t pay for past R&D; it pays for current R&D.”
Innovative biopharmaceutical companies make long-term investments seeking cures.
Costs of drug development
On average, bringing a new medicine to patients takes 10 years and $2.6 billion, according to a Tufts University study. For every 12 medicines that make it to market, there are 88 other compounds that do not receive FDA approval. The process to gain approval is so strict that when the Food and Drug Administration approved 41 new medicines in 2014, it was a record.
Innovation requires patience, and it requires a business environment that promotes investment. And through innovation and competition in the market place, biopharmaceutical companies can continue to bring new medicines to market that reduce overall health care costs.
Maryland is the home of leaders like the National Institutes of Health, Johns Hopkins University and the University of Maryland. We are 2nd among the 50 states in the amount of federal research and development funding invested in our state at $14.6 billion.
But biomedical breakthroughs aren’t funded by the government alone. In fact, each year the biopharmaceutical industry invests more in research and development than the entire NIH operating budget.
I know we are all concerned about health care costs, monthly premiums and out-of-pocket costs that our insurance companies will not cover. But passing legislation that threatens Maryland’s innovation economy is not the answer.
Let’s develop comprehensive solutions to address rising health care costs instead of doing the bidding of out-of-state insurance companies – at the expense of one of Maryland’s most dynamic, homegrown industries.
Jay Steinmetz, a member of the Maryland Regulatory Reform Commission, is the CEO of Baltimore-based Barcoding Inc.