With Higher Prices, the Need to Promote Longer-Term Value of Pharmaceuticals

The keynote session at the Academy of Managed Care Pharmacy’s Nexus meeting this week aired notes of resistance and denial, resignation, and acceptance. This may sound familiar, especialAMCP logoly if frustration was substituted for actual grief, and closely reflects the process for dealing with the death of a close friend or relative. In this case, one could say that the dearly departed is pharmaceutical pricing rationality.

The panel discussion was in many ways a eulogy. Alan Weil, Editor-in-Chief, Health Affairs, moderated the service. The chief question at hand was whether we are willing or able to pay for innovative therapies that may cost a half-million dollars or more? Mr. Weil pointed out that apart from their cost, these new therapies (e.g., CAR-T) “fit poorly into our current payment model.”

Steve Miller, MD, Senior Vice President and Chief Medical Officer, Express Scripts, said that the answer is no. We are apparently not willing to pay for them, based on the hepatitis C treatment paradigm today. He noted that the antiviral treatments available today are highly curative. “Although hepatitis C treatments have come down in price, we, as a society, do not pay. We’ve treated only one third of the patients so far. And now, we’re challenged with a $1 million treatment. We need to change our mindset.”

Jane Barlow, MD, MPH, MBA, Senior Advisor, Massachusetts Institute of Technology Center for Biomedical Innovation, countered that in the end, “We will pay. The patients want these innovations. The question is really the sustainability.”

J.D. Kleinke, Medical Economist, agreed, saying that “We as a country demand access, and we demand progress. People will sue for it, have bake sales for it, to force the system to pay for it.”

“If the hepatitis C vaccine cost originally $10,000 per month and it was to be taken chronically, people would not worry much about paying for treatment, said Robert DuBois, Chief Medical Officer, National Pharmaceutical Council. The original price tag of $84,000 for a limited treatment course, however, did set a firestorm of controversy.

There also seems to be a different reaction when speaking to payers one to one, according to Dr. Barlow. She said that in private conversations, payers express less concern than in groups [or in the press]. “When we say we’re spending too much, we seem to be spending more,” she said.

Web image 1With new gene therapies and immunologic approaches, the pricing models and relatively few people treated will force payers and purchasers to take a different evaluation approach to value, said Dr. Kleinke. This may involve a longer view towards future productivity or “value capture.” With this concept, if a drug company charges $100,000 for an intervention that helps produce $1 million in productivity or additional benefit, the drug “captures” 10% of the value of the transaction.

Perhaps our ability to pay for them is a very different question. Until now, pharmaceutical pricing could be explained relative to other similar therapies or compared with the likely costs of future care avoided. It may be that future productivity gained, rather than medical costs avoided, may be a better framework for evaluating the pricing of these next generation interventions.

Trump’s Ire at Pharma Industry Pricing: An Opening for Biosimilars?

Every day of the newborn Trump Administration, sets of executive orders are issued and bunches of meetings with business icons are held. The tweets, orders, and conferences produce the same uniform message—disruption. This is probably good and bad for the health care industry. Certainly, in the short term, this is bad for patients. The pharmaceutical industry and health care delivery systems could benefit from some disruptive influence. However, the unintended consequences of these rapid-fire actions will be, as President Donald Trump might say, “huge.” Certainly, it will take time for the implications on patient care of each attempt at change to be fully felt, much less assessed.Image result for Trump

The pharmaceutical industry has been the most recent focus of President Trump’s actions. The first salvo was his pronouncement that the pharma industry has been “getting away with murder” with regard to the pricing of their drugs. If this is truly a concern for the administration, then biosimilar manufacturers should be heartened to believe that ways to get their agents to the market sooner would be a focus. On the other hand, if the approach is more punitive towards those demonstrating little regard for affordability, then it would seem unlikely to be truly beneficial to biosimilar makers.

He also repeated a complaint to these executives that as a result of the high costs of these agents, he will have Medicare negotiate drug prices directly with the companies, taking advantage of its considerable leverage. This call has been made by others during the Obama Administration, but the drug industry had successfully detoured the discussions though its powerful lobbying efforts. Today, the confluence of other events, such as the highly contentious price escalations by Valeant and Mylan, widely publicized price increases for drugs like insulin and biologics, and Trump’s tweets, has convinced some in the pharmaceutical industry to heed this call, lining up to pledge limits in price increases.

Taking on the role of a business-friendly chief executive, the President announced at a meeting of industry leaders that he intends to slash most of existing Food and Drug Administration (FDA) regulations that apply to the industry and cut staff, yet bringing drugs to the market more rapidly. At the White House conference on January 31, he told leaders from Celgene, Johnson & Johnson, Merck, Novartis, and the trade group PhRMA that “we’re also going to be streamlining the process, so that from your standpoint, when you have a drug you can actually get it approved, instead of waiting for many, many years.”

However, the regulatory aspect of the discussions is confusing, because President Trump has also called for faster drug approvals by the FDA, while also streamlining the department. Beyond the time needed for FDA to conduct its full drug evaluations to ensure safety and efficacy, the agency is continually under pressure to quicken the rate of approvals, with limited staff to do so. In fact, I heard one industry consultant quip that with the present pharmaceutical pipeline, “it could take a century or more to approve all of these products at FDA’s current pace.” This staff is funded through PDUFA legislation. Yet, the President’s Administration has also called for a hiring freeze among federal agencies. Does this include the FDA? If so, it seems that hopes for speeding the process would have to rest on streamlining the evaluation process itself, which would likely face a good deal of public, health provider, and academic resistance.

Finally, President Trump warned that more than three-quarters of FDA regulations will be slashed. No one can be sure which regulations he was alluding to at this time, but it does sound as if the pharmaceutical industry will be the beneficiary. However, these pronouncements do sound like promises that cannot be practically fulfilled or well considered.

The FDA exists for consumer protection, not for the enrichment of the pharmaceutical industry. Regulation is necessary in private health markets (as for any private market), for the sake of patients, the health economy, and population health improvement. Shareholders need regulatory protection, as well, just not from the FDA.