EVERETT — As politicians propose to rein in the cost of prescription drugs, the chairman of Snohomish County’s largest biotechnology company warned Wednesday that such initiatives could hinder future innovations.
Paul Clark, chairman and chief executive officer of Bothell-based ICOS Corp., said price controls would make it nearly impossible for companies to recoup the research and development costs that go into new drugs.
As it is, only three out of 10 drugs that make it to the market generate enough revenue to match their research and development costs, he said.
"I think it’s hard to point to many — if any — technology companies or industries that have survived price controls," said Clark, who spoke in Everett at the quarterly meeting of the Snohomish County Economic Development Council.
ICOS is the largest publicly held company based in the county and the biggest biotech firm based in the Northwest. It’s best known as the developer of Cialis, an erectile dysfunction drug that’s competing worldwide against Viagra.
Clark, 57, came to ICOS in 1999 after working for Abbott Laboratories and other pharmaceutical businesses.
Despite attention on the rising cost of drugs, Clark said, they account for only 8 cents of each dollar spent on health care in the United States, according to a 2000 study by the federal Health Care Financing Administration. Much more is spent on hospital and doctor costs.
He also cited studies showing that drug costs have risen faster in countries with controls than here. Consumer choice and medical progress also suffer in those nations, he said, quoting a British newspaper columnist about controls there.
"No country with price controls has a drug industry that can sustain itself," Clark added.
Clark’s argument for continuing free-market practices in the pharmaceutical and biotech industry comes after the passage of a Medicare bill that provides a prescription drug benefit for seniors.
That bill, which narrowly passed in Congress, prohibits the federal government from importing drugs from Canada or negotiating to lower drug prices for Medicare recipients.
Some members of Congress, however, want to revisit those limitations. The issue of allowing the sale of cheaper drugs from Canada, which has price controls, also is being considered for all patients.
Clark said the main effect of price controls is how they would reduce the chances that a drug will be profitable.
With limits on drug prices, Clark said, biotech firms would have a difficult time attracting investors. Ninety percent of the nation’s biotech firms are losing money, ICOS included, as they spend years and millions of dollars to develop drugs and get them through the FDA’s approval process.
Raising enough money to sustain a biotech company through long years of research work already is tough enough, he said.
"In my five years at ICOS, I’ve had to do it three different times. It’s really, really hard," he said. "If it’s hard for us, it’s really hard — excruciating — for the smaller firms out there."
Clark offered some alternatives for helping patients who struggle to afford prescription drugs. Instead of offering drug coverage for all Medicare patients, he favors a benefit that covers just those who need it.
"We should, and we have to, take care of those people, but that would cost a fraction of what it costs to cover everyone," Clark said, predicting the new Medicare drug benefit will be "enormously expensive" to provide.
The Congressional Budget Office has estimated the new drug benefit will cost $400 billion over 10 years. But Medicare’s top actuary has said the price tag will be closer to $534 billion.
Reporter Eric Fetters: 425-339-3453 or firstname.lastname@example.org.