In Shkreli's wake, KaloBios vows fair pricing. Will others follow?

none(Photo by Rae Allen, Creative Commons license)

KaloBios ($KBIO) pledged a fair pricing oath last week as part of its corporate brand-saving maneuver away from one-time CEO and industry bête noire Martin Shkreli.

But with pricing continuing to dog the entire industry, will other pharma companies consider similar moves? Valeant Pharmaceuticals ($VRX), another drugmaker criticized for arbitrary price hikes, recently said it wouldn't increase prices as much as before, but never agreed to specific terms or even a "fair" model.

"KaloBios is small and they've been stung by the association with Shkreli, so they're trying to change that by taking on a new policy--one almost like a non-profit," said David Williams, president of Health Business Group, in an interview with FiercePharmaMarketing. "That might make sense for them, but I don't think that's the right approach for the rest of the industry." Williams recently wrote a company blog post titled "Is pharma industry too meek on pricing?"

"Google or Apple don't get asked to charge for their products based simply on their costs," Williams told FiercePharmaMarketing.

While pharma companies shouldn't have to publicly commit to razor-thin margins and open-book accounting, they probably do need to address pricing in a more rational and cohesive way, he said.

Pharma has long offered the explanation that new drug pricing helps to recoup some of the enormous costs of discovering and bringing meds to market. More recently, they've acknowledged that drugs can be expensive, but emphasized the future cost savings that medications can offer the overall healthcare system. Neither argument has swayed critics, politicians or public opinion much. Nor Williams.

"Before Shkreli and the widespread number of expensive products there are now, most pharma companies, especially the bigger ones, were very careful about pricing and making sure it wasn't set too high," he said. "What they did was much less egregious, but at the same time it's still not a completely rational market."

Because it's likely to remain that way at least for now--with government programs and multiple payers, not to mention patients, all in the drug-cost mix--pharma should instead focus on the value proposition of drugs, offering explanations that can be backed up with facts or stand up to scrutiny, he said.

In some cases, that may involve using the quality-adjusted life years (QALY) measurement to show actual dollar values, Williams said, while in others, it may simply be arguing the drug's worth for its transformative value in patients' lives.

That still may not be enough, however. California is considering a bill Wednesday that would require drug companies to formally report any drug price increases over 10% within a 12-month period. As Stat reported, it's one of several states trying to take drug pricing into its own hands even as the federal government and politicians vying to be president talk up national options.

- read Williams' blog post
- see the Stat coverage