Biotech capital markets rebounded last year after a down year in 2018. The Nasdaq Biotechnology Index is up 24% for the year, but this is still about 5% below the gains by the rest of the market. Much of these gains are due to the perseverance of a biotech sector that delivered some transformational achievements in 2019 despite fierce political headwinds.
One of the year’s biggest breakthroughs will benefit some 30,000 cystic fibrosis patients in the United States. Their disease creates thick, sticky mucus that can build up in organs, becoming especially serious when it’s in the lungs. Cystic fibrosis can be fatal in early adulthood. Life expectancy is currently 37 years.
Now, roughly 90% of cystic fibrosis patients can seek an FDA-approved treatment option for their affliction thanks to FDA approval of a breakthrough treatment by Vertex Pharmaceuticals. Vertex has been a regulatory pioneer. The company received the first breakthrough therapy designation from the Food and Drug Administration and used that to help speed this drug to market. Vertex also worked with the FDA to secure approval to replicate in a petri dish cystic fibrosis gene mutations that were too rare to study in actual people.
Biotech companies like Vertex specialize in creating drugs for rare diseases — those with U.S. patient populations less than 200,000. In fact, more than half of all drug and biologic approvals worldwide in 2018 were for rare diseases. This trend benefits the roughly 30 million Americans who live with rare diseases, over 95% of which have no approved treatments.
The lack of treatments for rare diseases is multifactorial. Drugs developed for rare diseases take, on average, four years longer to gain approval than more prevalent diseases, according to a 2018 report by the Tufts Center for the Study of Drug Development. It is more difficult to recruit patients to clinical trials because of smaller patient populations. And it can be more difficult for innovators to recover investment because fewer affected patients means fewer sales.
This challenge has led companies developing rare disease treatments to set price points higher for smaller patient populations, and these higher price tags have contributed to public anger at drug prices in America. In fact, a Gallup poll released in September found that drug manufacturers had become our nation’s least popular industry. Companies comprised of scientists working on products to save and improve lives had slipped in the public’s esteem below industries like Big Oil, Big Tobacco and gunmakers — whose products shorten and end them.
In this difficult climate for drug innovators, House Speaker Nancy Pelosi has pushed drug pricing legislation through the House of Representatives that seeks to impose European-style price controls on American-made drugs. The bill passed the House in December on a party-line vote. Fortunately, its political prospects appear to be limited, as the White House has strengthened its opposition.
The White House Council of Economic Advisers predicted the bill would lead to as many as 100 fewer new drugs over the next decade, if enacted. Joe Grogan, who leads the White House Domestic Policy Council, told reporters, “Nancy Pelosi’s bill right now is unworkable, it’s impractical, and it’s hyper-partisan, and it is not going to pass in its current form.” The White House acknowledged that a reduction of new drugs by one-third over the next decade would have “substantial negative effects on Americans’ health.”
While Congress is divided on solutions for drug pricing reform, there are other health care topics that will be central to the political climate in 2020. During the 2018 midterm elections, a Gallup poll showed that health care is the No. 1 issue on voters’ minds. The focus on health care issues greatly influenced Democrats’ success in the 2018 midterms, producing the highest voter turnout of any midterm election in more than 50 years.
This remained true in a RealClear Politics poll this May, in which 62% of respondents said health care is one of their two most important issues. Of the health care topics covered in the NBC/Wall Street Journal poll, drug pricing was No. 1 and single-payer coverage was a close No. 2.
There remain heavy divisions within the Democratic party regarding Medicare for All, and it seems as though the presidential primary will be a referendum on whether it’s included in the party platform. And important questions remain unabated about whether Americans should be able to keep their private insurance plans, how this will affect the quality of their health care and how we could possibly pay for this.
On the plus side, we may yet see the fruits of bipartisan common ground when capping out-of-pocket costs for seniors in Medicare Part D. The Senate has proposed legislation smoothing the benefit over 12 months rather than requiring seniors to satisfy their entire deductible with a big bill in January.
A final issue of growing importance is antibiotic-resistant infections — commonly known as superbugs — and the difficulties of attracting sufficient investment to create innovative antibiotics. Nearly 100 Americans die each day from superbugs. A 2019 report by the Centers for Disease Control and Prevention (CDC) found that nearly 3 million Americans have contracted a superbug infection. More than 35,000 lose their lives every year. What’s worse is that this may just be the tip of the iceberg, as experts have projected roughly 27,000 may die each day by 2050.
While antibiotics are only part of the public health arsenal against infections, they remain a powerful and important tool. However, there’s only been one novel antibiotic developed in the last 25 years, because the market is broken.
Achaogen, a small biotech company, developed one of the few new antibiotics approved in 2018, but it generated less than $1 million in sales in its first year on the market, and the company went under. Achaogen ran into systemic health care challenges — namely that antibiotics are intended to be used sparingly to preserve their effectiveness. Unfortunately, the more an antibiotic is used the less effective it becomes over time as patients build up resistance.
Antibiotics are most commonly used in hospitals or health care facilities — accounting for roughly 85% of deaths from antibiotic resistant drugs — where the reimbursement process can be so complex and perverse that there are very limited rewards for an innovative, higher-cost antibiotic over a less effective generic.
The pitfall that Achaogen experienced is not unique. If our elected officials don’t enact significant policy changes soon, more companies will continue to flee this space. That’s why Biotechnology Innovation Organization is working with congressional leaders to advance legislation that would make constructive improvements to the reimbursement system to promote antibiotic innovation.
Because we’ve taken for granted the medical innovations of the 20th century, we’re now standing on the precipice of a crisis. It’s incumbent upon industry, health insurers and elected officials to work together to defeat bad public policy and embrace incentives that will enable drug makers to promote patient access, produce more successes like Vertex’s, and help innovators defeat antibiotic-resistant superbugs.
Jim Greenwood is the president, CEO of Biotechnology Innovation Organization.