Health care costs keep rising, but biopharma is not the enemy

Second to Harvard and MIT, Cambridge is arguably best known for its booming biopharma industry. The city fosters an ecosystem focused on addressing devastating diseases, enabled by thought-leading academic medical centers, well-funded research labs and access to top talent. Having worked in biopharma for 20-plus years, I moved here five years ago to expand my expertise and network.

Biopharma has been credited with turning deadly diseases into chronic conditions, and with developing cures for patients who would otherwise fill hospital beds. Like many of us, I have lost family members to horrible illnesses, yet others are thriving due to treatment advances. No other industry has touched my life as significantly.

Decades ago, I wanted to be a health care professional on the frontlines, like my mother who was a nurse for 40-plus years. As I learned more about pharmaceuticals, though, I desired to help develop the next generation of life-saving medicines and chose to redirect my career.

Living and working in Cambridge with its inspiring biopharma ecosystem continues to give me a sense of purpose. I’ve helped advance drugs through clinical development and ultimately to market, and I’m grateful I’ve supported bringing meaningful therapies to patients in areas such as cancer, autoimmune disease and neurodegenerative conditions, among others.

As an industry that has done so much good, how is it that biopharma suffers from such negative public perception?

A few bad actors can tarnish perception of the whole, but these can be found across every sector. Why is biopharma often defined by the bad ones? I suspect the answer is that we’ve failed to educate the public about the vital work the industry does every day.

In the past 50 years, the average life span in the United States has increased to 79 years from 72. Globally, this increase has been even more pronounced, rising to 73 years from 58. This roughly 24 percent increase in life span is due largely to advancements in medical procedures and treatments such as antibiotics, vaccines, antihypertensives, insulin, chemo and immunotherapies.

Despite this progress, at some point in our lives, nearly all of us will experience disease – either directly or indirectly through family and loved ones. Many of us consider access to health care a universal right, and we all want it to be more affordable.

Biopharma’s value proposition is often misunderstood. In the United States, only around 10 percent of health care costs are attributable to medicines, and after some 14 years, branded medicines lose exclusivity and costs drop substantially. The other roughly 90 percent of what we pay in health insurance premiums goes primarily to fund hospitals and services – a cost that increases continually. The 10 percent or so funding therapeutic innovation reduces emergency room visits and time spent in hospital beds, delays long-term care placements and ultimately lowers health care costs while helping us live longer.

It can often take 10 to 15 years to bring a drug to market and cost upward of $2 billion. The drugs that do make it to patients are rare research-and-development wins, making up only 1 out of between 5,000 to 10,000 compounds considered during the discovery phase. The rest fail.

The discovery process suffers particularly from unbalanced risk versus reward, which is why larger pharma has essentially outsourced early and midstage R&D to biotech companies and academic institutions. These biotechs are often funded by investment firms and institutional funds – which include our retirement assets. So essentially you and I pay for biomedical innovation, and we deserve fair returns (or we’d put our savings elsewhere).

So if biomedical research is important to preserving our health, extending our lives, lowering health care costs and even protecting our retirement assets, why does the industry have such a bad rap?

For one, the price of a drug is easy to write about, and to target with legislation such as the Inflation Reduction Act, which lets Medicare influence prices of certain drugs just nine years after they reach the market, making some medicines uninvestable. The new Smart Prices Act goes even further, aiming to impose price controls on all drugs just five years after launch. If this bill becomes law, it could defund therapeutic innovation in the United States while having minimal impact on our systemwide health care costs and patient out-of-pockets.

The unfavorable dynamics of biopharma research provide the rationale for high prices of certain branded medicines: to fund R&D. Health insurance is meant to insulate us from these prices, yet patient out-of-pocket costs often deter needed care, and misdirect public attention to drug prices. This continues to be a problem for policy makers to address. We must remember where around 90 percent of our health insurance costs go – to hospital system spending that is increasing perpetually with little transparency to patients – while drug costs decrease over time.

We need truth in health insurance – meaning real coverage, transparency and low out-of-pocket costs that patients can afford. Let’s fix health insurance and our broader health care system. Villainizing biopharma is not the solution.

Neil Kairen, Child Street, Cambridge

The writer is managing director at Biotech Value Advisors.

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