Understanding biopharmaceutical investment decision-making: how does Congressional Budget Office's model compare to investor insights?

The Congressional Budget Office (CBO) created a model of new drug development with the aim of informing the US Congress about the potential impact of policy changes affecting expected biopharmaceutical revenue on future innovation. While models are by their nature simplifications of reality, biopharmaceutical investment decision-making is particularly complex and poorly understood outside the investment ecosystem, raising questions about the adequacy of such models to inform policymaking. To better understand how CBO's model compares to real-world investment decision processes, we conducted semi-structured interviews with investors representing venture capital, private equity, corporate venture capital, and biopharmaceutical companies. The interviews with investors suggest that the CBO's model does not adequately reflect investment decisions for drug development. These findings highlight the risks of using models to guide policymaking and the need to improve the existing model with the help of stakeholder input before such models are adopted.