US Sen. Elizabeth Warren (D-MA) has unveiled plans to introduce new legislation she says will require pharmaceutical companies found guilty of regulatory and legal non-compliance to pay large fines, all in the hopes of providing a new funding stream to the National Institutes of Health (NIH).
The Premise: Big Profits Come From Government
In a speech at a healthcare conference on 22 January 2015, Warren—a populist Democrat whose meteoric rise to popularity has left some wondering if she might soon run for president—noted that since "the early 2000's, Congress has been strangling the funding needed for medical research."
Warren said the lack of funding had troubling implications for a "system of medical innovation [that] had transformed the health of literally billions of people around the world."
Warren then turned her sights on the pharmaceutical sector, which she noted has capitalized in part on the medical research conducted by government entities like the NIH.
"We celebrate the accomplishments of our pharmaceutical industry, because these blockbuster drugs let people live longer, healthier lives. But we are also mindful that these companies did not do it alone," Warren said, mirroring a theme that has frequently found its way into her campaign speeches.
"Blockbuster drugs that generate billion-dollar profits and are used by millions of consumers don’t just appear overnight as if by magic. Rarely do they appear as the result of a single, giant company’s individual genius. Drug companies make great contributions, but so do taxpayers," she argued. "In other words, we built those medical innovations together."
A bigger problem, Warren argued, is that some drug companies have been violating advertising regulations and the law. "They’ve been caught defrauding Medicare and Medicaid, withholding critical safety information about their drugs, marketing their drugs for uses that aren’t approved, and giving doctors kickbacks for writing prescriptions for their drugs," she said.
And because those companies almost always settle with government officials before going to trial, noncompliance is increasingly being seen as "just another cost of doing business," she argued.
Regulatory Non-Compliance, Meet a New Fine
Warren's legislation, the Medical Innovation Act, would require "blockbuster drug companies" to "reinvest a relatively small portion of the profits it has generated as a result of federal research investments right back into the NIH" each time it enters into a "major settlement with the government."
"Only the biggest and most successful pharmaceutical companies would be required to reinvest in NIH," Warren said. "No small or medium-sized innovator would ever pay."
Warren compared her plan to a "swear jar."
"Whenever a huge drug company that is generating enormous profits as a result of federal research investments gets caught breaking the law – and wants off the hook – it has to put some money in the jar to help fund the next generation of medical research."
Warren's plan has received swift and negative feedback from the US pharmaceutical industry's main trade group, the Pharmaceutical Research and Manufacturers of America (PhRMA). Spokesman Robert Zirkelbach disputed the foundation of Warren's proposal, noting that PhRMA member companies have invested half a trillion dollars in R&D since the year 2000. "This represents the vast majority of all biopharmaceutical R&D spending—both private and government—in the US," he wrote.
"The NIH plays a vital role in basic research and early discovery, and we support sufficient federal funding for their work," he continued. "But pursuing misguided policies that siphon funding from the groundbreaking medical research happening in the biopharmaceutical industry will have devastating consequences for patients and society."
Warren's speech, however, provided a pre-emptive counter to part of PhRMA's argument.
"This isn’t a tax," Warren said. "It is simply a condition of settling to avoid a trial in a major case of wrongdoing. If a company never breaks the law, it will never pay the fee. If an accused company goes to trial instead of settling out of court, it’ll never pay the fee – even if it loses the case."
Other drug industry commentators took issue with Warren's plan as well. Derek Lowe, a chemist and the author of the widely-read In the Pipeline blog, said one problem with the proposal will simply be the lack of stability associated with the funding. Recent years have seen some of the largest fines ever recorded, but "Historically, that isn't the kind of cash that comes in all the time." A lack of stable funding might then prevent NIH from launching multi-year projects—the type that often lead to transformative changes in medicine.
Lowe has previously taken issue with another premise of Warren's argument: that NIH is a catalyst for many of the drugs approved in the US.
Lowe notes in a 2010 post that of the 252 drugs approved between 1997 and 2005, 76% originated through research at pharmaceutical and biotechnology companies, while the remaining 24% originated in academic research centers. While NIH may have performed key research that allowed companies to go after drug targets, that research is only one part of a multi-step drug development process.
Warren's legislation is expected to be introduced within the next two weeks. While it likely stands little chance of approval in the current Republican-controlled legislature, it could be a powerful sign that pharmaceutical regulation will be back in the crosshairs in the coming 2016 US presidential election.