Investors and Innovators Representing more than $309B in Biotech Assets and 624 New Drugs in Development Urge the Congressional Budget Office to Update its Drug R&D Policy Impact Model

Washington — More than 350 biotech investors, executives, and economists today called on the Congressional Budget Office (CBO) to update how it assesses the impact of federal drug pricing legislation to ensure that policies adopted today don’t prevent new, lifesaving drugs from being developed in the future.

In a letter sent on Tuesday by No Patient Left Behind (NPLB), investors representing $309 billion in assets under management and executives of drug companies developing 624 drug candidates shared their real-world experience and highlighted the economic principles that underpin how investors make decisions about funding early-stage biomedical research.

The letter was written in response to a public request posted by CBO Director Phillip L. Swagel on the office’s blog in December asking for input on “how changes in pharmaceutical companies’ expected future profits affect the development of drugs with differing characteristics, such as small- or large-molecule drugs or those that target certain diseases or patient populations (such as the elderly).”

CBO’s current methodology has come under increased scrutiny since passage of the Inflation Reduction Act (IRA) for significantly underestimating the law’s negative impact on new drug R&D investment. Specifically, the IRA included a provision that makes new small molecule drugs eligible for price setting by Medicare just nine years after launch, as compared to 13 years for large-molecule biologic medicines. No Patient Left Behind’s letter provides real-time evidence that the nine-year small molecule penalty is already causing a sharp decrease in new investment in both the development and utility of potential new drugs. CBO’s 2021 model incorrectly predicted that the IRA would have a negligible new R&D impact and did not adequately inform the public about the types of drugs that could see reduced early-stage funding.

Peter Kolchinsky, founder of No Patient Left Behind and Managing Partner of RA Capital Management, said: “Just about every noteworthy biotech investment firm has signed onto this letter. It is inspiring and impactful to see leaders from the biotech ecosystem pull together to help CBO better understand how new drug funding and innovation decisions are made. Though we are often asked for evidence of programs that we haven’t funded because of the nine-year penalty, we hope this letter explains that though such evidence is hard to tease out since every decision is based on many factors, one need only look to economic first principles to appreciate why one shouldn’t be surprised to learn that early-stage funding is being strongly discouraged by this policy. Through a combination of arguments and analogies, the letter gives CBO the

insights we think it needs to improve its pricing and innovation policy impact models. We appreciate the CBO asking for input, and, of course, we remain open to continued dialogue.”

Grace E. Colón, CEO of Inaya Therapeutics and board member at several public and private biotech companies, said: “This letter provides CBO with the real-world analysis and experience of investors and drug developers, including the types of financial and portfolio metrics that drive decisions around investment and resourcing. We urge CBO to recognize the crippling effect the nine-year penalty will have on breadth and quality of new drugs available to patients, and on the ability to further improve outcomes and healthcare productivity in the future.”

Peter Rubin, Executive Director of No Patient Left Behind, said: “Even the most well-intentioned academics miss the nuances of new drug R&D that this letter provides. We hope that CBO will improve its future policy impact models by incorporating the real-world decision-making of leading biotech investors and innovators who take actual financial risks to speed discovery of new drugs for patients and society.”

To support CBO in updating its model, No Patient Left Behind’s letter identifies a number of specific points where CBO’s previous assumptions and statements have diverged from the real-world experience of investors and early-stage drug researchers. For example, CBO models appear to rely on academic studies that focus on total revenues that a drug generates, while investors and drug companies are mindful of profits – and how decreases in profits at nine years are more significant than similar decreases after 13 years.

The full letter and its recommendations to CBO can be found here. Investors and executives who are just coming to it are welcome to sign on; it will remain open to signatures until it is no longer needed.

There is increased urgency surrounding CBO’s updates to its model as policymakers consider policy proposals to modify the IRA. Potential changes include implementing Medicare price negotiation just five years after new drugs launch, extending the IRA’s existing timelines beyond Medicare to all market segments, and eliminating the nine-year small molecule penalty.

For more background on the policy recommendations in this letter and the importance of updating CBO’s methodology, see the following resources:

• No Patient Left Behind’s recommendations on how CBO can improve its model for assessing the impact of policies on prescription drug innovation.

• An explainer prepared by some of the signatories of the letter that illustrates investor decision-making at each stage of drug development: “Beyond Total Revenues, how IRA impacts investors’ early-stage R&D decision-making.”

• An NPLB webinar that details how investors and industry executives think through the IRA as well as its potential impact on drug commercialization.

• A guide to how the small molecule penalty is already impacting investor and innovator decision-making, including data describing revenues over the course of a small molecule’s product life cycle.

No Patient Left Behind (NPLB) is a network of biotechnology innovators, investors, healthcare professionals, and patient advocates working to ensure that patients have access to the medicines they need today and in the future. Through rigorous, independent research and data analysis, NPLB promotes biotech affordability and innovation, advancing common-sense

solutions that enable every patient to afford the drugs prescribed by their doctor at low or no out-of-pocket cost — while also preserving the incentives for investment that spur the development of new, life-saving treatments. In tandem with its research efforts, NPLB educates leaders and stakeholders across the biotech ecosystem about thoughtful and balanced policy solutions. Learn more about NPLB’s latest initiatives at www.nopatientleftbehind.org.