What's wrong with the drug pricing climate? Ask a different pharma CEO, get a different answer

PillsandMoney
Drugmakers disagree on why consumers dislike the pharma industry and what should be done to get its reputation back on track.

Drugmakers haven’t been shy this week about sharing their views on drug pricing and how pharma should proceed in that arena going forward. Thing is, they don’t all agree.

Tensions were on full display Thursday when a panel of biopharma CEOs at the Forbes Healthcare Summit was asked to shed light on why people dislike the industry. The “real reason,” according to Regeneron CEO Len Schleifer? “We as an industry have used price increases to cover up the gaps in innovation,” he said, as quoted by Business Insider. Using acquisitions or price hikes to boost revenue instead of new, innovative products is “not the business I want to be in,” he continued.

Pfizer CEO Ian Read, though, argued that the industry features a variety of different business models—some, for instance, more appropriate for the $38.79 billion Regeneron, and others for $192.23 billion Pfizer. "The total cost of drugs as a percentage of healthcare has not changed in two decades," he said.

Biopharma’s reputation has taken a beating over the past year and half as politicians, payers and consumers pushed back at the industry’s use of price increases. While a handful of companies—including Turing, Valeant and, most recently, EpiPen-maker Mylan—have taken the brunt of the criticism, the entire industry has felt the heat.

That’s one reason Allergan CEO Brent Saunders has been pushing his peers to limit their price-jacking, as he pledged to do in September with the rollout of his company’s “social contract” with patients. When Allergan’s prices do rise, they’ll do so only once a year, and by a single-digit percentage, the Dublin drugmaker vowed.

Another reason? Saunders would rather see the industry make its own reforms than politicians do it for them. And make no mistake, he warned in a Thursday op-ed—they will.

“Limit your price increases before we all face the impact of government regulation that stifles innovation and patient care,” he wrote.

So far, no one has followed in Allergan’s footsteps when it comes to publishing an official covenant. But that doesn’t mean fellow drugmakers are not watching their every pricing move.

“I’m not saying we’re perfect,” Merck CEO Ken Frazier told Bloomberg Thursday at the Summit. “... But if you look at the whole portfolio, you will see that Merck has tended to be rather restrained when it comes to drug prices,” he noted, calling raising prices without a corresponding benefit “foolhardy.”

The way Mylan CEO Heather Bresch sees it, though, it’ll take more than just corporate restraint to really repair the relationship between pharma and consumers. It’s up to policymakers to increase transparency on how drugs are priced so consumers know where their money’s going, she figures.

“There’s a lack of understanding of where that full list prices goes and how it is divided in the system,” she said at the meeting. “The pharmaceutical pricing system was not built on the idea on consumer engagement.”