‘ You want to cre­ate a sys­tem where an en­tre­pre­neur or a com­peti­tor can eat Martin Shkreli’s lunch’

“In terms of over­all drug costs, as long as it takes $2.5 bil­lion in 10 years to get a prod­uct to mar­ket, it is go­ing to be chal­leng­ing. So, look­ing at ways to mod­ern­ize and re­duce those de­vel­op­ment cy­cles is re­ally im­por­tant.”

Modern Healthcare - - Q & A -

Stephen Ubl wants to ac­cel­er­ate com­pe­ti­tion in the drug in­dus­try. That, he said, is one way to slow the pace of price in­creases for phar­ma­ceu­ti­cals, not to men­tion keep such rogue ac­tors as Martin Shkreli and Tur­ing Phar­ma­ceu­ti­cals in check. Ubl, who took over as CEO of the Phar­ma­ceu­ti­cal Re­search and Man­u­fac­tur­ers of Amer­ica in late 2015, would also like to see the fed­eral gov­ern­ment make it eas­ier for drug­mak­ers to ven­ture into the value-based pay­ment world. Ubl re­cently stopped by Mod­ern Health­care’s Chicago of­fices to meet with the edi­to­rial team. The fol­low­ing is an edited tran­script.

Mod­ern Health­care: The in­dus­try’s com­pet­i­tive land­scape has been some­thing that Dr. Scott Got­tlieb has fo­cused on since be­com­ing com­mis­sioner of the Food and Drug Ad­min­is­tra­tion. What’s your take on po­ten­tially in­tro­duc­ing more gener­ics into the field?

Stephen Ubl: Much of the neg­a­tive press at­ten­tion fo­cused on the in­dus­try over the last year or two has been fo­cused on th­ese types of ex­am­ples, whether it’s Martin Shkreli and Tur­ing or Valeant and the com­mon de­nom­i­na­tor is they are old drugs, they are off-patent, where there is a lack of ef­fec­tive com­pe­ti­tion.

We have been quite sup­port­ive of steps that the FDA could take, in­clud­ing clear­ing the back­log at the agency. I came out of the med­i­cal de­vice in­dus­try be­fore join­ing PhRMA. There is a bit of an anal­o­gous sit­u­a­tion, in that the de­vice in­dus­try is dom­i­nated by mid­size and smaller firms and a lot of generic man­u­fac­tur­ers, keep­ing in mind that they are not in­vent­ing the prod­uct. Where they fall down gen­er­ally is in man­u­fac­tur­ing the prod­uct. And we think the FDA could take a more for­ward-lean­ing pos­ture in en­gag­ing with those man­u­fac­tur­ers to help them re­solve man­u­fac­tur­ing is­sues.

If you look at the in­cen­tive struc­tures that Congress has en­acted in the past in our space, whether it is for or­phan drugs or pe­di­atric drugs, we know how to cre­ate in­cen­tives for mar­ket en­try. And we think those hold prom­ise as well in the generic space, so whether there are tax in­cen­tives or man­u­fac­tur­ing in­cen­tives or other in­cen­tives that could en­cour­age other man­u­fac­tur­ers into the mar­ket, we think that’s the best way to ad­dress th­ese reg­u­la­tory ar­bi­trage sit­u­a­tions.

MH: Are there spe­cific in­cen­tives that come to mind?

Ubl: The back­log is the most straight­for­ward one. You want to cre­ate a sys­tem where an en­tre­pre­neur or a com­peti­tor can eat Martin Shkreli’s lunch, but it is hard to do that if it takes four to five months to get a com­peti­tor prod­uct on the mar­ket. Be­yond that, struc­turally, greater in­cen­tives. There is also a re­la­tion­ship, as well, to the user-fee agree­ments. Mak­ing bet­ter use of real-world ev­i­dence we think holds great prom­ise in terms of short­en­ing de­vel­op­ment cy­cles and bring­ing prod­ucts to mar­ket more ex­pe­di­tiously.

MH: Com­pe­ti­tion is seem­ingly what’s be­ing fo­cused on, but it’s not the only an­swer, and it is not 100% suc­cess­ful ei­ther. Even with some drugs in the mar­ket­place that have four or more com­peti­tors on the generic side, does it nec­es­sar­ily mean that prices are go­ing to come down?

Ubl: Sev­eral months af­ter I joined PhRMA, we is­sued a 10-page pol­icy doc­u­ment that looks at all the ar­eas of the ecosys­tem—the FDA and the re­im­burse­ment arena and so forth—to try and ad­dress af­ford­abil­ity. We have to ac­knowl­edge that pa­tients are pay­ing more for their health­care and they are pay­ing more for their drugs. But it is a sys­tems ques­tion at many lev­els. Drug spend is ac­tu­ally mod­er­at­ing pretty sig­nif­i­cantly. Look­ing at Ex­press Scripts data for

2016, drug spend­ing is up about 3.5% and net prices are up about 2.8%. What’s not mod­er­at­ing is pa­tient out-of-pocket spend­ing for medicines. It has gone up nearly 50% since 2013. All of this against a back­drop of in­creas­ing re­bates and dis­counts that our mem­bers are ne­go­ti­at­ing with phar­macy ben­e­fit man­agers and plans. Re­bates and dis­counts have nearly dou­bled over the same time pe­riod to over $100 bil­lion. The ques­tion is, how do we cre­ate in­cen­tives for pa­tients to ben­e­fit at the point of sale and more di­rectly ben­e­fit from th­ese ne­go­ti­a­tions be­tween our mem­bers and other stake­hold­ers?

One of the other ar­eas I have tried to pri­or­i­tize is value-based ap­proaches and con­tract­ing. There have been a hand­ful of th­ese ar­range­ments and there are pub­lic pol­icy bar­ri­ers and op­er­a­tional bar­ri­ers. On the pol­icy side, Med­i­caid best­price re­port­ing rules. You are go­ing to have dif­fer­en­tial re­im­burse­ment based on how the prod­uct per­forms for a par­tic­u­lar pa­tient, which means the re­im­burse­ment could the­o­ret­i­cally be zero. You don’t want that re­im­burse­ment rate nec­es­sar­ily to re­set your Med­i­caid best price. There has to be some ex­cep­tions built in to th­ese ar­range­ments that fac­tor that in.

If you look at the Of­fice of In­spec­tor Gen­eral guid­ance, it’s nearly 20 years old and was built in a fee-for-ser­vice world. So, for ex­am­ple, if our mem­bers want to of­fer a novel dis­count, say pack­age sev­eral on­col­ogy agents to­gether and of­fer a bun­dled rate, that is cur­rently against the law, or if they want to pro­vide trans­porta­tion ser­vices or ad­her­ence pro­grams. The OIG his­tor­i­cally has viewed those as in­duce­ments to use the prod­uct. As you move to cap­i­tated mod­els where our mem­bers are tak­ing greater risk, we don’t think that makes a lot of sense.

MH: On a broader level, should there be more trans­parency on what the list prices are, what dis­counts are be­ing ne­go­ti­ated, and how that trans­lates ul­ti­mately to the fi­nal price?

Ubl: We have ad­vo­cated for trans­parency that pa­tients can re­ally use. We have done our own re­search, other peo­ple have as well and, in gen­eral, pa­tients want to know if their physi­cian is in their net­work. Is the hos­pi­tal in the net­work? What is my out-of-pocket cost go­ing to be? Is the drug I need cov­ered? Is it on the for­mu­lary that I can ac­cess?

There is ob­vi­ously room for more trans­parency in the sys­tem. There is a point at which re­search shows that com­plete trans­parency leads to other dis­tor­tions of the mar­ket­place that are not help­ful. It is a con­vo­luted sys­tem and we have been quite out­spo­ken in the need to evolve the pric­ing model away from a sys­tem where three phar­macy ben­e­fit man­agers con­trol 80% of the mar­ket. Plans are su­ing PBMs; state at­tor­neys gen­eral are look­ing at th­ese dy­nam­ics. A lot of the fees that PBMs charge are tied to list price.

So there is clearly room for change, and we think we should be mov­ing away from those types of a re­bate dis­count arms race to a bet­ter, more-in­formed value-based dis­cus­sion.

MH: Look­ing at reau­tho­riza­tion of the Pre­scrip­tion Drug User Fee Act, do you fore­see that as a po­ten­tially pos­i­tive out­come and continuing the re­search sur­round­ing some of th­ese drugs, par­tic­u­larly with how it is struc­tured around spe­cific tiers of scal­ing?

Ubl: We are re­ally ex­cited about PDUFA, and the po­ten­tial trans­for­ma­tive ef­fect it could have, par­tic­u­larly, build­ing on the 21st Cen­tury Cures Act and other ini­tia­tives that the com­mis­sioner is un­der­tak­ing. Taken to­gether, all of those things hold ter­rific prom­ise. In terms of over­all drug costs, as long as it takes $2.5 bil­lion in 10 years to get a prod­uct to mar­ket, it is go­ing to be chal­leng­ing. So, look­ing at ways to mod­ern­ize and re­duce those de­vel­op­ment cy­cles is re­ally im­por­tant.

MH: If the user fees go up, as pro­posed, could that squeeze out some of the smaller com­pa­nies that wouldn’t be able to ac­com­mo­date such fee hikes?

Ubl: I’ve not heard that con­cern.

MH: If the re­view process is stream­lined, how do you bal­ance that with the con­cerns on safety, qual­ity and ef­fi­cacy?

Ubl: There are im­prove­ments that can be made with­out sac­ri­fic­ing the FDA’s gold stan­dard around safety and ef­fec­tive­ness. And we have al­ready seen that, for ex­am­ple, in the can­cer space, whether it is novel clin­i­cal trial de­signs or bet­ter use of real-world ev­i­dence. It is go­ing to be in­creas­ingly pos­si­ble to mea­sure a prod­uct’s per­for­mance af­ter ap­proval and set up this vir­tu­ous dy­namic where we are cap­tur­ing in­for­ma­tion in real time and ad­just­ing pa­ram­e­ters ac­cord­ingly.

It’s not in the in­dus­try’s best in­ter­est, ei­ther, to have a bar set in a way that the prod­uct doesn’t per­form in the mar­ket­place. We have a mu­tual in­ter­est in en­sur­ing that the reg­u­la­tory process re­mains ro­bust, and yet we have emerg­ing ma­chine learn­ing and other dis­ci­plines that are evolv­ing and giv­ing reg­u­la­tors more con­fi­dence be­cause they re­ally will be able to cap­ture real-time in­for­ma­tion in the mar­ket­place in a non­con­trolled, non-clin­i­cal trial set­ting.

MH: How much ad­vo­cacy has PhRMA been do­ing on the 340B drug dis­count pro­gram?

Ubl: We have been quite pub­lic in our views of the 340B pro­gram and re­forms that we would like to see in terms of the out­pa­tient pro­posal the ad­min­is­tra­tion made. We don’t think (the CMS’ pro­posed pay­ment cuts rule) goes far enough. We would like to see the pro­gram fun­da­men­tally re­formed to re­strain its growth and to en­sure that pa­tients ben­e­fit more di­rectly from the dis­counts.

The 340B pro­gram has grown ex­po­nen­tially. It was a pro­gram that was ini­tially in­tended for about 100 hos­pi­tals that now 2,500 hos­pi­tals can use to ac­cess dis­counts in the neigh­bor­hood of 30% to 50%. We don’t ques­tion the un­der­pin­ning of the need for this pro­gram. But, again, it would be nice to see the ben­e­fit flow to the pa­tient more di­rectly.

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