Build Back Better Act to Impact Bio-Industry Negatively

The U.S. House on November 19 voted 220 to 212 to pass the “Build Back Better” Act (BBBA) reconciliation bill (H.R. 5376) that includes more than $1.5 trillion in business, international, and individual tax increase provisions. The legislation is now being debated in the Senate, initially by the Finance Committee

It includes several drug pricing provisions that MichBio and the broader biopharma industry believes could significantly impact continued investment in biopharmaceutical innovation – particularly in rare diseases and therapeutic areas with small patient populations.

The primary focus of BBBA is on adopting price controls under the guise of “negotiations” between the U.S. government and manufacturers, a move that brings the country one step closer to government-run healthcare.

Beginning in 2025 the Secretary of Health and Human Services could negotiate the prices of up to 10 “negotiation-eligible drugs.” That figure will increase to 20 drugs annually by 2028. A negotiation-eligible drug is a small-molecule drug or biologic that has had at least 7 years or 11 years of exclusivity respectively (these numbers have changed several times in recent days) that is among the 50 single-source drugs with the highest total expenditures in Part B or Part D. The proposal would set a ceiling for the negotiation of between 40 percent and 75 percent of the non-federal average manufacturer price, scaling down depending on how far the drug is past its initial exclusivity period. Moreover, blood-derived therapeutic products and vaccines would no longer enjoy exemptions and would be subject to price setting negotiations as well

The Congressional Budget Office has found that passage of the proposed price controls would have compounding negative implications regarding drug development.  In the third decade, Americans would see 9 percent fewer drugs developed, though independent reports have shown how this is a considerable underestimate.

The package includes other recycled drug-pricing policies—including both inflation penalties and arbitrary limits on patient insulin cost—but broadly, the BBBA seeks to constrain the cost of prescription drugs to lower costs for patients and reduce federal spending—but without reducing access to treatments for patients.

Additionally, the legislation could have a detrimental impact on biosimilar and generic development. Companies considering launching a generic or biosimilar product may not be able to undercut the government-set price of the reference product enough to obtain market share sufficient to offset their costs.

The BBBA proposes to eliminate the Orphan Drug Tax Credit that has served to incentivize companies to develop drugs for rare disease patient populations. The proposed changes to would directly limit the ability for innovator companies to invest in research and development in rare diseases of which 93 percent do not have available treatments.

MichBio and other state bio affiliates joined groups like AdvaMed, BIO, NVCA, Angel Capital Association, to advocate for maintaining the current Qualified Small Business Stock (QSBS) provisions in the tax code and not adopting proposed provisions in the BBBA would change the treatment of QSBS. These changes would have a significant negative impact on the ability of startups and small companies to raise early-stage investment capital.

MichBio has reached out to our Congressional representatives, especially Sens. Stabenow and Peters, on the serious ramifications that BBBA would have on Michigan’s and the broader biopharma industry.