U.S. President Donald Trump’s vow to roll back government regulations at least 75% is causing anxiety for some pharmaceutical executives that a less robust Food and Drug Administration would make it harder to secure insurance coverage for pricey new medicines.
The prospect of big change at the regulatory agency comes as drugmakers are under fire for high prices, including Marathon Pharmaceuticals, which said Monday it was “pausing” the launch of its Duchenne muscular dystrophy drug after U.S. lawmakers questioned its $89,000 a year price.
Industry trade group Biotechnology Innovation Organization told Reuters that during high-level discussions with Trump advisors, lobbyists urged the administration not to name a new commissioner of the Food and Drug Administration who would act rashly to speed up the agency’s approval of new medicines.
That sentiment was echoed by executives at more than a dozen pharmaceutical and biotechnology firms, who told Reuters that the FDA is already adopting new drug development models and warned that a looser review process would put patients at risk.
“People often argue that the FDA is too restrictive,” said Roger Perlmutter, head of research and development at Merck & Co (mrk). “We have the sense that the balance is pretty right … you have to have a well-characterized risk/benefit profile.”
That stance underscores the unique position the drug industry finds itself in when it comes to regulating its products. While most sectors welcome less oversight, drugmakers say a robust review process is critical in convincing physicians and insurers that a pricey new medicine has value.
Otherwise, the time and money it takes to get a new drug to market—estimates run as high as $2.6 billion—would be lost if insurers are not willing to pay for the product.
“It is great that the administration is seeking deregulation … to make sure the private sector can be more competitive,” said John Maraganore, chief executive officer at Alnylam Pharmaceuticals (alny) and co-chair of BIO’s regulatory committee. “But payers are looking for evidence of value.”
He said the FDA should speed the approval of lower cost generic versions of drugs that have lost patent protection, but warned that allowing novel products to be launched without extensive testing could be dangerous.
“Any change at the FDA that allows drugs to be tried out on patients without clinical evidence is a damaging approach,” said Jeremy Levin, chief executive officer at Ovid Therapeutics, which is developing drugs for rare diseases.
Health insurers are pushing back against high-priced drugs. Sales of expensive new cholesterol drugs from Amgen (amgn) and Regeneron Pharmaceuticals (regn) have stalled as insurers limit coverage until they see results of trials designed to prove that the drugs significantly lower the risk of heart attack and other cardiovascular crises.
“It is one thing to get a drug approved, but you have got to get reimbursed,” said Paul Perreault, CEO at biotech company CSL (cmxhy), adding that won’t happen unless payers see proof that a new drug is better than what is already available.
To be sure, some pharmaceutical executives have been vocal about the need for deregulation. Reducing regulation “will help with drug prices, because it will induce more competition,” Pfizer (pfe) CEO Ian Read said on a recent conference call.
After top executives at Merck, Johnson & Johnson (jnj) and others met at the White House last month with Trump, who pledged to “streamline” the FDA, industry trade group Pharmaceutical Research and Manufacturers of America said the meeting found common ground such as tax reform, and removal of outdated regulations. The trade group declined to comment on changes at the FDA.
The prospect of a shake-up at the FDA is being welcomed by a new class of investor with ambitions to disrupt the current drug development model, in which larger pharmaceutical players often buy or license early-stage medicines, and reap the bigger rewards if they succeed.
“The system we have now has its roots 50, 60 even 70 years ago … it has become incredibly expensive,” said Tim Shannon, of venture capital firm Canaan Partners.
He supports the notion that some prescription medications could reach the market, possibly at discounted prices, once testing shows they are safe. If such controlled usage indicates that they are also effective, prices could then be raised.
“We want to make healthcare itself more efficient,” he said. “Let the marketplace decide how valuable a drug is.”
The fate of deregulating the FDA will be driven by its next commissioner. President Trump said last month he has a “fantastic person” lined up for the role.
Candidates, according to sources close to the administration, include former FDA staffer Scott Gottlieb, and Jim O’Neill, a colleague of Trump supporter Peter Thiel who has advocated for allowing some medicines to reach the market once they are shown to be safe, even if there is scant evidence that they work.
A recent survey of drug company executives conducted by Mizuho Securities found that 72% said Gottlieb should be Trump’s pick to head the FDA.
“There is no groundswell of movement for change,” said attorney Jim Shehan, head of Lowenstein Sandler’s FDA regulatory practice. “The industry likes certainty.”