The state’s booming biotech industry has long enjoyed a tight — some would say coddling — relationship with Beacon Hill. Massachusetts has invested hundreds of millions of taxpayer dollars to help life sciences companies grow.
Suddenly, the relationship is more complicated.
A proposal by Governor Charlie Baker to curb drug prices paid by the state Medicaid program has biotech leaders up in arms.
As state lawmakers meet behind closed doors to hash out a final version of the plan, they are also grappling with this question: How does Massachusetts hold accountable an industry that it helped to build?
Baker’s plan, announced in January, is among the most aggressive in the country to target drug pricing. It would give state officials more power to demand that companies negotiate lower prices. If a company doesn’t negotiate, state officials could publicly set a target value for its drug and subject the company to more oversight from the state Health Policy Commission — including public disclosure of price information. And if the commission determines a drug price is unreasonable or excessive, it could ask the attorney general to investigate under state consumer protection law.
If approved, these rules could apply to about 200 of the most expensive drugs in the state Medicaid program — including those developed by Massachusetts companies that have benefited from public incentives, according to public records obtained by the Globe.
The governor tucked drug pricing controls into his state budget plan; lawmakers are negotiating their budget now.
The Massachusetts Biotechnology Council argues that Baker’s proposed rules would chill investment in medical innovation, stunt job growth, and bruise an important sector of the economy.
“If government isn’t taking a stance that the industry wants, [we’re] not going to do as well,” said MassBio’s president, Robert K. Coughlin.
Coughlin said Baker’s proposal would dissuade companies from moving to the state while encouraging those already here to shrink their local operations — or leave entirely. He has made his case to Baker’s secretary of health and human services, Marylou Sudders, and directly to the governor.
“The industry does not have a good relationship with him right now,” Coughlin said.
A national lobbying group, Pharmaceutical Research and Manufacturers of America, also opposes Baker’s plan.
Administration officials contend that the costs of prescription medications — particularly new drugs that have no competition — are growing too briskly. Before discounts, the cost of drugs in the state Medicaid program, known as MassHealth, nearly doubled over six years, to $1.9 billion in 2018. MassHealth provides coverage for more than 1.8 million people, including the state’s poorest residents.
Administration officials expect their plan would save the state $70 million in the current fiscal year, and up to $140 million annually after that.
The governor, responding to questions from the Globe after speaking at a recent event in Cambridge, said that the biotech industry “does amazing things, and we would like them to continue to do that.”
Asked if his proposal could hurt local jobs and investment, Baker said: “I can’t believe that on the margin it would have that much of an impact.
“What we’ve proposed is a pretty thoughtful way that creates a lot of process to do this,” he said. “And I think our process, frankly, is a hell of a lot better than some of the other ones people have been talking about, which are much more blunt-instrument approaches.”
The Senate largely supports Baker’s plan. But the House, after a lobbying push from MassBio, backed a softer version of the plan that strips requirements around public disclosures.
House majority leader Ronald Mariano said Baker’s proposal goes too far and would hamstring companies that are forced to publicly reveal confidential information about how they price their drugs.
Employment in the state’s biopharma industry — from tiny startups to the biggest pharmaceutical companies — has increased 28 percent in a decade, to about 70,000 jobs. And the jobs pay well, with wages averaging about $150,000 a year, according to a MassBio report. Sanofi, Shire, Biogen, and Novartis are among the state’s biggest bio-pharma employers.
“It’s been a great success,” said Mariano, a Quincy Democrat. “Just drive through Kendall Square and you can see the buildings that have been created, the economic activity that has been created.”
Employers have long been attracted to Massachusetts’ universities and educated labor force. But in the midst of the Great Recession, Governor Deval Patrick decided to expand the state’s role in growing jobs. Without government help, Patrick said in an interview, the state’s burgeoning biotech sector could have been lost to other states and countries.
“We had a good cluster, but it was at risk,” the former governor said. “California had put a welcome mat out.”
In 2008, with legislative approval, Patrick’s administration launched an ambitious plan to grow the life sciences in Massachusetts through an infusion of public spending. In the first decade of the initiative, the state committed more than $677 million in grants, loans, tax incentives, and other support.
Patrick — who is removed from the debate at the State House and hasn’t taken a position on current legislation — said state support for biotech should not exempt the industry from accountability.
“It has to be OK for a friend of the biotech industry to ask how to moderate costs,” he said. “Who better than a friend?”
But Baker’s strategy to lower drug prices has taken many by surprise.
Executives and investors at several Boston-area companies declined to speak on the record about the governor’s plan, though in private, they are grumbling.
“That’s not how you treat one of your most successful industries,” said one local biotech executive.
“The fear I have is we put a policy in place that hasn’t been tested,” he said. “It will send a very strong signal to innovators: If you are successful in creating a breakthrough medicine, in this state you will be subjected to the most severe consequences in terms of pricing.”
The biopharma industry is a force on Beacon Hill. MassBio’s Coughlin is a former state representative who also worked in the Patrick administration. Before that, former House speaker Thomas Finneran led the trade group.
So elected officials have been reluctant to take on the industry, said state Senator Mark Montigny, a New Bedford Democrat and longtime critic of drug companies.
“Beacon Hill has coddled Big Pharma,” Montigny said. “Because it’s such a successful industry, many leaders on Beacon Hill have gotten ga-ga on life sciences.”
Montigny and others, including the consumer advocacy group Health Care For All, believe drug companies will easily survive this effort to curb drug prices in MassHealth. They also support further legislation to tackle drug costs that goes beyond what Baker has proposed.
“We know how important it is to have innovative new drugs available to patients,” said Alyssa Vangeli, codirector of policy and government relations at Health Care For All. “We think manufacturers should be allowed to earn a profit for their drugs — but we don’t think those profits should be limitless.”
A conference committee of six House and Senate lawmakers is continuing its negotiations on a final budget deal, including the issue of drug pricing. It’s unclear if legislators will settle on the more flexible House approach or the more aggressive tack from the Senate.
Biotech lobbyists, no doubt, will be watching closely.
“We’re not telling them not to innovate,” said Senator Cindy Friedman, a member of the budget conference committee and co-chairwoman of the Joint Committee on Health Care Financing. “We’re telling them to help us understand why people across the country and the Commonwealth are paying the drug prices they are paying.”