Opinion: The new law that could stealthily transform biomedical innovation

Buried deep within the Inflation Reduction Act’s drug-price negotiation provisions is language that could open the way to a new era of biomedical breakthroughs and smarter health spending.

This language does something Medicare hasn’t tried before: It ties payment for treatments to how well they work. Doing so used to be illegal. But it will now be required for some drugs.

For the future of health spending, this is a bigger deal than Medicare’s power to negotiate drug prices. It could also energize industry as a partner in President Biden’s Cancer Moonshot and other efforts to transform treatment of diseases. Here’s why:


A driving force behind soaring medical spending is the proliferation of high-cost tests and treatments that deliver little added value. An analysis by two of us (M.G.B. and N.U.S.) shows how interlocking financial, legal, and psychological factors make adopting these tests and treatments exceedingly difficult to restrain.

First, developers of such tests and treatments can count on insurers to cover them and patents to protect their high prices, with little regard for how well they work.


Medical ethics and malpractice law, moreover, lock these low-value “innovations” into clinical practice. Hippocratic ethics demand that doctors do everything for their patients that might yield even tiny benefits. The prospect of lawsuits pushes doctors to go along, since courts enforce rules for care that the medical profession adopts.

Patients, meanwhile, yearn for hope when serious illness looms. Withholding even the smallest chance of therapeutic benefit can thus seem cruel. Developers of new tests and treatments know this; it’s one reason they bring therapies with small marginal advances to the market with little regard for their cost.

Consider, for example, the drug regorafenib (Stivarga), used to treat some metastatic colon and rectal cancers. It’s a hail-Mary treatment for people in tragic circumstances — it adds, on average, six weeks of life, at a price of $40,000 — nearly $350,000 per year of life gained by those who take this drug. Yet regorafenib became standard treatment for these patients, prescribed by their oncologists and paid for by insurers. It’d be beyond-callous for insurers to refuse.

Marshalling Medicare’s buying power to push down some drug prices won’t disrupt the inflationary dynamic we’ve described. Indeed, even in countries like Canada and Germany that wield single-payer purchasing clout to restrain clinical prices, medical spending is rising at rates similar to the U.S.

Why not simply say “No” to high-cost, minimal-value medical care, starting now? In theory, that would work. In practice, it’s impossible. Americans would react with outrage to so-called health care rationing, as they have in the past to hints that public or private insurers might withhold beneficial care.

Politicians (and stakeholders who benefit from spending on high-priced health services) would stoke this outrage, as they have in the past. Industry stakeholders — hospitals, biopharmaceutical companies, medical device makers, and clinical specialty societies — would lobby fiercely against government limit setting that endangered their revenue streams.

But consider a truth that hides in plain sight. Patients don’t demand medical technology that doesn’t yet exist. Doctors, hospitals, and drug and device makers don’t insist that insurers cover it. People aren’t outraged by, say, lack of access to wonderous therapies depicted in Star Trek films, though we may yearn for future cures for diseases that terrify us.

Deterring the development of high-cost, minimal-benefit tests and treatments can forestall their adoption and thereby slow health care inflation. Yet innovation that delivers therapeutic breakthroughs should at the same time be vigorously encouraged.

Here’s where the Inflation Reduction Act’s quietly radical move to tie drug prices to therapeutic success comes in.

Medical prices have historically had little to do with clinical efficacy. The new law, however, requires Medicare to assess the “extent to which [a] drug represents a therapeutic advance as compared to existing therapeutic alternatives” — and to pay drug makers accordingly. It thereby rewards therapeutic leaps forward while discouraging development of drugs that make little difference.

This sends a signal to innovators to aim high and try for transformative therapies rather than drugs that offer little added benefit. Congress should broaden and amplify this signal by directing Medicare and Medicaid to base payment for all tests and treatments on therapeutic value. Private insurers should follow.

In the same vein, patents — which grant lawful monopoly power to innovators as an incentive to create new drugs and devices — should vary in duration based on evidence of clinical effectiveness.

To minimize stakeholders’ resistance to this approach, Congress could grandfather current clinical measures and adopt these payment and patent reforms only for new tests and treatments.

For decades, the U.S. has fueled wasteful medical spending by rewarding high-tech wizardry without heed to its therapeutic impact. America can both catalyze clinical breakthroughs and contain soaring costs by tying payment to the difference tests and treatments make for patients.

M. Gregg Bloche is professor of health law, policy, and ethics at Georgetown Law. Neel U. Sukhatme is professor of law at Georgetown, a visiting scholar at the U.S. Patent and Trademark Office, and an Andrew Carnegie Fellow. John L. Marshall is chief of hematology and Oncology at Georgetown’s Lombardi Comprehensive Cancer Center.

Source: STAT