Representatives ponder balance of regulation, innovation in health care

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The U.S. health care system needs fair market conditions that drive innovation and entrepreneurialism that will lead to healthy patients and healthy small businesses.

On May 8, the House of Representatives’ Committee on Small Business held the hearing, “Stifling Innovation: Examining the Impacts of Regulatory Burdens on Small Businesses in Healthcare.” It was the second hearing of the day to deal with business and medicine, because the Senate Budget Committee also convened to discuss the best ways to cut administrative burdens in health care.

In the House Committee, four experts found Republican and Democratic lawmakers sympathetic to small and independent physicians and researchers developing new pharmaceuticals. Several lawmakers and witnesses described experiences of loved ones battling diseases. They aimed some comments at the U.S. Food and Drug Administration (FDA) and the Centers for Medicare & Medicaid Services (CMS), although representatives from those agencies did not testify. Some remarks were critical of the Inflation Reduction Act supported by President Joe Biden.

Maintaining balance

“The balance between risk and innovation is a fine line and we must be able to maintain that,” said Chair Rep. Roger Williams (R-Texas). “This Committee knows that small businesses are on tip of the spear across the economy when it comes to innovation in any industry. The health care industry is not an exception.”

New drug development takes years and “an extremely high price tag,” Williams said. On top of that is FDA’s bureaucratic process, and that affects how doctors treat patients, he said.

“Doctors want to treat cure and innovate, not spend time on bureaucratic red tape,” Williams said, noting a personal connection as his wife undergoes treatment for glioblastoma.

Ranking Member Rep. Nydia Velazquez (D-New York) said she has faith in FDA’s review of drugs, although FDA and Congress have tried to expedite the review process. Regulatory flexibility can lead to abuse, she said.

“Occasionally drug companies use expedited programs to circumvent placebo-controlled studies, then drag their feet on conducting the required follow-up studies,” Velazquez said. “As a result, companies are able to garner millions of dollars in sales without proving clinical effectiveness.”

Witness views

FDA could reform its process to make it easier for smaller companies to conduct clinical trials needed to show new drugs are effective, said Brian J. Miller, MD, MBA, MPH, an assistant professor of medicine at Johns Hopkins University School of Medicine. He also has experience working at FDA and the Medicare Payment Advisory Commission.

For example, patient data could be collected from assessments at home, not in study centers, which would decrease the cost of trials, a benefit for small companies. FDA should be restructured to collapse layers of administration and have analysts on the front line of reviewing medical products for safety and efficacy, he said.

Meanwhile, the IRA signaled to entrepreneurs that they will undergo centralized administrative price regulation of their products. Combined with costs of clinical trials, the price is “very high” to develop drugs in the United States, while China aims to dominate the biopharmaceutical industry through manufacturing and clinical trials, Miller said.

‘Who is in charge of patient medical care?’

David Anthony Eagle, MD, a New York oncologist, described his first practice in North Carolina.

“In 2017, one large health system in our region gave us an ultimatum: Be acquired by us or we will hire a physician to compete against you,” Eagle said. “One of the prime motivators for this aggressive move by the health systems was the federal 340B drug pricing program. The acquisition of our practice would generate substantial immediate profits for the health system, allowing it to further expand. Furthermore, we were faced with declining payments for Medicare and commercial insurers.

“In 2018, my two partners and I had little choice but to join the large hospital system and employees our small, independent practice that had served the community for over 19 years, was gone,” he said.

His current practice in New York is the only major cancer treatment provider that accepts all insurance plans, does not receive state funding, and that has high peer ratings.

“We face a fundamental choice in this country: Who is in charge of patient medical care? Is it physicians and patients making decisions, treatments, together in the exam room? Or is it insurance companies, massive, consolidated health systems, and government regulators like CMS controlling personal health care decisions from afar?” Eagle said. “Over my career, this shift has absolutely been toward the latter.”

‘Eyebrow-raising figure’

William J. Newell, JD, CEO of Sutro Biopharma Inc., said his company’s experience is a microcosm of the small biotech financing experience. It is the only manufacturing facility using cell free protein technology at scale to develop new drugs against cancer.

In its 19-year history, his company has raised almost $1.6 billion toward research – and is still a precommercial company, meaning it has yet to secure FDA approval for a medicine they developed.

“That eyebrow-raising figure is, unfortunately, very typical of the small biotech experience in bringing a product to market,” Newell said. “Also like many biotechs we've had our share of failures along the way. This is not unusual for our industry. Only approximately 12% of products reaching clinical development stage are (approved), and just half of products reaching phase three pivotal trial stage ever get FDA approval.”

‘What’s the alternative?’

FDA has been flexible in the past when granting approvals for drugs to treat diseases, with the pharmaceutical companies sometimes promising studies that never come, and sometimes making a lot of money anyway, said Diana Zuckerman, PhD, president of the National Center for Health Research. Congress also has passed FDA user fee legislation that helps level the playing field for small companies, she said.

Small businesses will have resources to meet FDA evidence standards for many medical products, but not all, Zuckerman said.

“What's the alternative? If the FDA reduces the burden on companies by not requiring them to provide clear evidence that a new product is safe and effective, that increases the burden on patients, families and physicians because we must make life-saving and life-changing decisions without the facts that we need to make the decisions that are best for us and our patients,” she said.

Representatives respond

Rep. Mark Alford (R-Missouri) said “rural health care is kind of at a crisis point,” with providers shutting down small practices that serve rural patients. While not an expert on rural health care, Eagle said rural practices suffer from the same problems that urban and suburban ones do. Regulation is harder to manage in those situations and reimbursement has been declining, he said.

Williams, Rep. Beth Van Duyne (R-Texas), Rep. Marie Gluesenkamp Perez (D-Washington), and Rep. Marc Molinaro (R-New York) all asked about effects of consolidation on physicians practices or independent pharmacies.

Perez asked how Congress could encourage competition and help independent practices thrive again. Payment parity between hospitals and physician office is an excellent place to start, along with reforming the 340B drug pricing program, Eagle said.

Van Duyne described one physician constituent who discussed spending more and more time checking boxes that CMS puts in front of doctors via electronic medical records (EMR), not practicing medicine.

Regulatory costs reached the point that it’s no longer feasible for small health care practices to keep their doors open, Van Duyne said. “It only leads to one thing, which is consolidation. And this is decreasing the quality of care it eliminates competition.

“We can't continue to allow overregulation to shut the doors of small care providers,” she said.

Van Duyne noted Miller previously testified before the Committee about the state of regulation of health care. “You think things have gotten better? Or you think things have gotten worse?” she asked.

“Worse,” Miller said. “I would say that I spend most of my time typing. And I remember one of my professors in medical school said I would be an excellent physician because I was a very fast typist.”

She asked Eagle the same question.

“Things have clearly gotten worse,” Eagle said. “Your point about the EMR could not be more on target. That's kind of where the rubber meets the road between a lot of the regulatory requirements and how physicians spend their time and is a huge burden for physicians to kind of spend all day checking boxes in the electronic medical record.

“The priorities of the EMRs are check the box documentation requirements and billing and not true medical decision making that actually benefits patients,” he said.