SOME DRUG-COMPANY EXECUTIVES STRUGGLE WITH PRICING DEBATE
No health care organization, including one legally considered nonprofit, wants to make less money. But as costs become more a part of public debate, all organizations are looking for ways to justify their prices.
Some more grudgingly than others.
“Let’s not fold to advocacy pressure,” Gilead Sciences executive Kevin Young wrote to colleagues, anticipating protests once the company’s high-priced hepatitis C medicine, Sovaldi, hit the market in late 2013, in an email released this week as part of a Senate investigation. “Let’s hold our position whatever competitors do or whatever the headlines.”
Once upon a time, after the FDA approved a drug as safe, doctors wrote prescriptions that were filled with little regard for cost, and pharmaceutical companies flourished.
Now, even as cheaper generic drugs are used for more than 80 percent of prescriptions, branded-drug companies—just to gain access to patients— must show that a new product is better than their competitors’ and will do less damage to corporate or public budgets. And, increasingly, drug companies will have to show long-term benefits—with such evidence often being out of their control.
With some pharmaceutical CEOs’ compensation exceeding $20 million last year as they cut jobs to maintain profits, they will get little sympathy.
“There is surround-sound right now on price and value,” Jamey Millar, a senior vice president for managed markets and government affairs at GlaxoSmithKline, said at a conference in Philadelphia.. “This is as much a story about budget impact as it is about cost-effectiveness.”
Terry Hisey, a senior life-sciences principal at Deloitte’s Philadelphia office, said every health care system participant has to fight the tendency to say, “Feel free to think outside any box but mine.”
Hisey said his clients are trying to get beyond thinking of pricing based on unit costs, but the discussions are just beginning.
“It is a complex problem,” he said. “We can’t simplify the problem. Our goal needs to be to make it simpler to deal with.”
In a later panel, Randolph Legg, a vice president of sales for drugmaker Boehringer Ingelheim, said there is a “trust gap” between the pharmaceutical industry and other health care sectors.
“As each presidential candidate adds this to their speeches, it will put pressure on pharma,” Legg said. Other sectors also are feeling pressure.
“How do you measure the treatment and care you are providing?” said panelist Jeffrey Farber, chief medical officer and senior vice president for population health with the Mount Sinai Health System.
Other wealthy nations have nationalized health care, which cancels out some of the sector competition that exists in America. Those sectors—hospitals, private insurers, doctor groups, pharmacy benefit managers, and drugmakers—are being pushed by public and private policymakers to show evidence of long-term value and improve overall patient outcomes at lower cost.
But the drive for revenue and profit gets in the way because data collection, for example, is still laborious and inconsistent, and not a moneymaker for some sectors. And who is at fault, and doesn’t get paid, if patients don’t take their medicine and their conditions worsen?
Drugmakers and doctors often blame insurers and pharmacy benefit managers, which are for-profit companies paid to negotiate and administer pharmacy benefit plans. Insurance and PBM consolidation has increased the leverage of the remaining companies.
“Using that leveraged clout to negotiate traditional rebate agreements (with drug companies) is a much more efficient model than trying to agree on measures over time, through multiple years, and determine through actuaries how much risk is on the manufacturer versus the health plan or PBM,” Millar said. “A lot of these ideas which are innovative and seem attractive collapse of their own weight when you get to operational dynamics.”