JPM pricing parley: False choices, secret deals and a hyperfocus on drug costs

By Angus Liu Jan 10, 2019 11:25am

From the moment then-president-elect Donald Trump made his comment that pharmas were “getting away with murder,” drug pricing has consistently made headlines in the U.S. And as Trump’s recent White House meeting with top advisers suggests, the pressure on pharma is here to stay.

Despite Trump’s furor, Congress’ scrutiny and public uproar, drug prices—at least list prices—are still going up, and the debate will only heighten as some very expensive gene therapies debut. There are ideas on all sides—as a FiercePharma panel discussion at the J.P. Morgan Healthcare Conference showed—but neither the government nor private payers nor the industry can come up with an effective solution alone.

The tension is “every manufacturer with a niche product is trying to maximize the return and value for their franchise, and at the same time we have to look at how to make sure we have healthcare and prescription medications that everybody can afford,” said Glen Stettin, Express Scripts’ chief innovation officer, during the FiercePharma panel discussion.

We’ve seen many great breakthrough therapies approved by the FDA in 2018 with many more to come, but “we need to have the government to create an equally innovative reimbursement system that understands the changing dynamics to those products,” Fritz Bittenbender, senior VP of government affairs at Roche’s Genentech, commented during the panel.

Some novel pricing tools, such as value-based pricing, have won accolades in early testing. Bittenbender also proposed a unique new drug reimbursement code for combo therapies to lower the combined price tag. But some other proposals from policymakers faced fierce resistance from the drug industry.

Lawmakers have argued that allowing Medicare to directly negotiate drug prices with pharmas could save the U.S. government billions of dollars in annual costs. The Trump administration in October unveiled a plan to use an “International Pricing Index” to force Medicare Part B drug prices closer to those in other developed countries.

Labeling these ideas “false choices,” Bittenbender said “they’re really good political rhetoric but they’re not really good problem solvers” for lowering costs or preserving the U.S.’ status as a top medical innovation market.

But in a phenomenon where some said the U.S. is paying for innovation and Trump himself has blasted as “global freeloading,” Stettin raised the common question—why should drug prices in the U.S. be higher than in many other developed countries?

“Should that be happening? No,” Bittenbender replied. “But does importing their price controls back in the U.S. solve that problem? That absolutely doesn’t.” As the Genentech executive sees it, those countries basically “rationalize care” and therefore impede access to new medicines.

Kristi Martin, senior VP leading healthcare at consulting firm Waxman Strategies, agreed that the U.S. healthcare system is fundamentally different from those in other countries. But she also argued that it’s imperative we have the conversation about how other countries handle pricing and consider their strategies. Some may be worth considering for U.S. use, if not their entire systems.

One oft-criticized element in the U.S. is regular price hikes, even on drugs that have been on the market for years. Stettin offered insights from Express Scripts clients’ perspective. “Whether it’s reference pricing to Europe or looking at [the Institute for Clinical and Economic Review] and putting some benchmark about what makes sense, as opposed to every modestly incremental improvement coming at a newer price point, that’s what’s threatening the ability of the payers for continuing to have an affordable benefit,” he said.

Drugmakers have been under fire from all directions for using some controversial tactics to block the entry of cheaper copies. For example, FDA Commissioner Scott Gottlieb himself has criticized branded drugmakers for using patent litigation and rebate schemes to hold off generic and biosimilar rivals, even though those problems go beyond the FDA’s jurisdiction. Under Gottlieb, the FDA has rolled out action plans for generics and biosimilars in an attempt to boost competition.

But as Gottlieb has noted, many biosimilars have yet to make it to the U.S. market, even many months after earning FDA approvals. During Tuesday’s discussion, Stettin suggested that biosimilar substitution would drive down prices quickly. Currently in the U.S., biosimilars are not considered interchangeable with their original drugs without further testing. Plus, as the FDA has explained, substitution of a biosimilar for a reference product is up to state pharmacy law and outside of the FDA’s regulation.

“If we could accelerate and get those [biosimilars] available faster as opposed to some of the secret deals that’re out there … for delaying products that are available elsewhere in the world, we would be able to save a lot of money very quickly and create headroom for the innovative new products,” said Stettin.

Drug pricing is obviously a problem not any single player can solve alone. But after all the talks, why haven’t we come to a reasonable solution? What’s missing? In the eyes of the two pharma executives on the panel, the conversation can’t just revolve around drug pricing itself.

“The conversation in D.C. is too narrow. We’re hyperfocused on drug pricing, and we’re not taking the time to have the bigger and broader discussion,” said Rick Suarez, AstraZeneca’s senior VP leading market access. “Blaming one another is not working. But coming together to try and solve the broader issue and understand how this actually all play out in the healthcare ecosystem is missing.”