Biden’s proposal to allow Medicare to set prices for drugs (both biologics and small molecule) after only five years on the market is DoA as long as Republicans control the House, IMO. If such a law were ever to be enacted, it would be all but impossible for drug companies to recover their investments in R&D, and hence the drug/biotech industry as we know it would cease to exist.
Most new drugs have a gradual ramp-up in sales volume as physicians become more comfortable prescribing them and additional indications are added to the label, so many drugs take longer than 5 years—some considerably longer—to reach their peak sales volume (irrespective of pricing). Allowing Medicare to set prices before a drug even reaches peak volume would lop off a very large proportion of a typical drug’s cumulative revenue and would result in few drug candidates having a sufficient risk-adjusted NPV to justify clinical development.
I won’t bother to talk about the other components of Biden’s proposal for drug prices because the 5-year aspect described above is an industry killer all by itself.
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