Op-Ed: NJ needs deeper conversation about drug prices

Op-Ed: NJ needs deeper conversation about drug prices
Op-Ed: NJ needs deeper conversation about drug prices
Rich Bagger

Any debate over prescription drug prices should begin with pointing out the facts that address several misconceptions. Among these facts are the great cost and long timelines required to develop innovative new medicines, how drug middlemen — known as pharmacy benefit managers (PBMs) — keep both drug prices and patient out-of-pocket costs artificially high, while according to the Drug Channels Institute net prices received by biopharmaceutical companies decline year after year, and a recent study by the Berkeley Research Group found that less than half the money spent on prescription drugs actually goes to the companies that discover, develop and manufacture them.

One misconception that is important to implement, especially in New Jersey, is that biopharmaceutical companies somehow operate separately from local communities, small businesses and job creation for Americans. What is lost in this superficial view is the extensive economic investment by biopharmaceutical innovators that provides jobs, opportunities and prosperity for people and communities in New Jersey and the nation.

There is no question that serious reforms are needed for how we pay for prescription medicines, to improve transparency, remove the misaligned incentives for PBMs that drive higher prices (because higher prices typically mean larger cash rebates to PBMs) and reduce patient out-of-pocket costs.

New Jersey took some helpful steps with legislation passed last year that expanded PBM transparency, put guardrails around PBM business practices and capped out-of-pocket costs for some medicines. However, when policymakers pursue short-sighted and ineffective policies such as government price-setting for prescription drugs in Medicare (under the guise of “negotiation”), establishing prescription drug affordability boards with authority to set prices for innovative medicines or attempting to import medicines From outside the US regulatory system, they need to be aware of the ripple effects of those policies and the impacts felt in the communities they represent.

The consequences of these harmful policies would apply across the biopharmaceutical business model, starting with investment in research and development. On average, biopharmaceutical companies spend over 20% of their revenues on R&D. It is not unreasonable, therefore, to assume that over 20% of the impact of price controls would be felt in reduced R&D spending. What represents the greatest component of biopharmaceutical R&D spending? Drug development and clinical trials, which are conducted at health systems across the United States, including at New Jersey’s academic medical centers, community hospitals and physician group practices.

Thanks to the outstanding higher education system in this state, New Jersey has become a center for biopharmaceutical R&D and the clinical trials that are essential in developing new treatments. Since 2004, there have been more than 7,300 clinical trials in New Jersey. Not only does this work help to achieve progress in battling diseases like cancer, diabetes and Alzheimer’s, but according to a study released by BioNJ, annual investments in clinical trials in New Jersey totaled $263.3 million and resulted in $779 million in economic output in 2013 alone .

With the reorganization of Rutgers University in 2013 to create Rutgers Biomedical and Health Sciences and bring Robert Wood Johnson Medical School and New Jersey Medical School into our state university, and the establishment of the Cooper Medical School of Rowan University in 2012 and the Hackensack Meridian School of Medicine in 2015, New Jersey’s biomedical research and academic medical ecosystem is expanding impressively, leading to an even greater concentration of biopharmaceutical research and clinical trial investment in our state, long known as the “medicine chest of the nation.”

And there is much additional spending on all other facets of drug development and commercialization that is deployed through small businesses in the Garden State and elsewhere. During my time working with biopharmaceutical companies, I saw extensive investments made in small businesses, creating good jobs, and helping the economy and our communities grow. One example that comes to mind was a minority-owned business that printed the Food and Drug Administration-approved instructions (referred to as the drug label) that accompany prescriptions. The categories of small businesses supported by biopharmaceutical companies are almost endless investment, ranging from market research firms, marketing specialists and clinical research organizations to cleaning services, landscapers, security guards and the coffee shops and delis supported by thousands of company employees.

This economic impact for New Jersey — and the more than 350,000 total jobs the biopharmaceutical industry supports in our state — has now been quantified. A study by We Work For Health looked at the vendor relationships of 15 biopharmaceutical companies in New Jersey. The research shows that those companies, in 2022, had business relationships with over 4,200 vendors accounting for more than $6.6 billion in total spending. That’s a tremendous benefit for the New Jersey tax base, providing resources for education, infrastructure and vital social services, and it’s delivering brighter futures for working families, small businesses and the communities we call home.

The lesson from this data is that policymakers are being remiss if they don’t consider the second-order effects and unintended consequences of taking the wrong policy approach to addressing prescription drug access and affordability. The United States, and New Jersey in particular, has benefited from this country being the world’s leader in biopharmaceutical research and development. How? It gives Americans faster and greater access to transformative, lifesaving and life-extending treatments, and creates good jobs, supports thousands of small businesses, contributes taxes to support important public services and creates economic prosperity for communities across our state.

There is no question that the issue of prescription drug access and affordability is one that needs to be addressed. No one should struggle to pay for the medications they need to preserve their health. That is why we should pursue proven policies that work, such as requiring PBMs to pass drug rebate savings on to patients in lower out-of-pocket costs and reducing patient cost-sharing for prescription medicines, not ones that sound good in a political ad but won’t make a difference for patients and risk serious harm to jobs and the economy.

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