Good Day BIO: Hospitals mark up cancer drugs by as much as 630%, says study

A new study provides more evidence that hospitals—not manufacturers—often determine what patients and insurers pay for lifesaving cancer drugs. Meanwhile, House Ways & Means Republicans reintroduced a tax package that would provide incentives for drug R&D, especially for small biotechs. (709 words, 3 minutes, 32 seconds)

Hospitals mark up cancer drugs by as much as 630%, says study

It’s more evidence that hospitals—not manufacturers—often determine what patients and insurers pay for lifesaving cancer treatments.

The key finding: For patients with private insurance, hospitals significantly mark up the price of 25 common cancer drugs, finds a study published in JAMA Internal Medicine.

The details: The median markup ranged from 118.4% to 633.6%, with prices varying significantly for the same products for different payors in the same hospital.

To put it another way: “The prices that private insurers agree to pay hospitals for cancer drugs are often at least double what the hospital paid to acquire the drugs,” explains Axios.

Also: The study found that "hospitals may earn greater revenue per unit from cancer therapies than the pharmaceutical companies that manufactured them."

Why it matters: “The blame for high drug prices goes well beyond drug manufacturers, and is ultimately borne by patients through higher premiums and out-of-pocket costs,” says Axios’ Caitlin Owens.

This data isn’t surprising to us…As we reported earlier this year, more than half of total spending on brand-name medicines in 2020 went to “non-manufacturer stakeholders—including PBMs, health plans, hospitals, the government, pharmacies, and others.” And drug prices continue to fall.

So, what now? “The findings of this study suggest that, to reduce the financial burden of cancer treatment for patients, institution of public policies to discourage or prevent excessive hospital price markups on parenteral chemotherapeutics may be beneficial,” conclude the study authors—BIO agrees.

More Reading: Brand Name Drug Prices Fell in 2021—Again.

New Ways & Means package ‘a critical building block for future biotech innovation’

House Ways and Means Republicans reintroduced several tax bills that will provide incentives for drug R&D, especially for small biotechs.

The news: Reps. Vern Buchanan (R-FL), Mike Kelly (R-PA), and Brad Wenstrup (R-OH) reintroduced what they call “major legislation that ensures a healthier future for all Americans.” Similar bills were introduced in July 2020—we covered them here.

What’s included:

• The American Innovation Act, which provides “special tax treatment for start-up costs” and preserves R&D tax credits. The bill passed the House in 2018 with bipartisan support.
• The Start-Ups for Cures Act, which creates an R&D incentive for small biotech companies engaged in infectious disease drug development.
• The More Cures Act, which creates a 14% bonus R&D tax credit for companies engaged in drug R&D, and bonus incentives for infectious disease R&D.
• The Infectious Disease Therapies Research and Innovation Act, which allows credits and losses associated with qualifying research to pass through to investors to offset other income.
• The American-Made Medicine Act, which provides tax credits for manufacturing in the United States.

The package includes one of BIO’s top capital formation priorities: Reform of the net operating loss (NOL) limitations under Section 382 of the tax code. 

What does this mean? Section 382 is an important anti-abuse measure to limit the use of a failing company’s losses by a profitable company. Unfortunately, these limits are also unintentionally triggered by investment in thriving small biotechs. The American Innovation Act would call off Section 382 for investments during a company’s startup phase, thereby preserving these valuable tax assets and encouraging investment.

BIO’s take: “Thanks in part to the contributions of small and emerging biotech companies, America is an innovation powerhouse,” says BIO. “By providing much-needed incentives for research, development, novel manufacturing, and more, it will allow biotech companies—especially small startups—to do what they do best: solve the world’s most complex scientific challenges.”

More News:

Bloomberg Green: Dairy giant Arla wants to pay farmers more for low-emission milk
“The reward program would incentivize the use of greener agricultural practices such as feed that cuts methane emissions and precision farming techniques.” 

Gilead: Kite receives U.S. FDA approval of new state-of-the-art CAR T-cell therapy manufacturing facility in Maryland
“The FDA approval of our Maryland site marks an important milestone within our global CAR T-cell therapy manufacturing network, and will enable us to significantly expand our production capacity and further strengthen our ability to meet the needs of people living with difficult-to-treat blood cancers,” said Christi Shaw, CEO of Kite (BIO member). 

Nature: Biotech firm announces results from first U.S. trial of genetically modified mosquitoes
“Oxitec reports that its insects behaved as planned—but a larger trial is needed to learn whether they can reduce wild mosquito populations.”

President Biden’s Wednesday: Meeting with the Secretary of Defense, the Deputy Secretary of Defense, the Joint Chiefs of Staff, and the Combatant Commanders, then hosting them for dinner.

What’s Happening on Capitol Hill: Recess.