Pfizer ($PFE) CEO Ian Read says he's met the drug-cost enemy, and it isn't pharma. The firestorm over U.S. drug pricing isn't a problem for drugmakers to solve, Read told Forbes in an interview. It's an insurance problem.
|Pfizer CEO Ian Read
The public debate about rising drug prices--be they increases for existing meds or 6-figure cancer-treatment costs--overlooks the financial benefits of drug treatment, Read contends. In his Forbes interview, Read cites cost-benefit analyses showing that Lipitor and other statin meds cost $305 billion between 1987 and 2008, but they generated $1.3 trillion in economic benefits, by preventing heart attacks and strokes, and their costs to the healthcare system.
Oncologists' complaints about the rising cost of cancer treatment are similarly misplaced, Read figures. Some high-profile cancer doctors have been vocal about expensive drugs, including one MD Anderson oncologist who's taken to social media to generate public protest. Memorial Sloan Kettering's cost-effectiveness expert Peter Bach has written newspaper op-eds and gone on the interview circuit to lament the $100,000-plus costs of new-generation cancer meds.
More formally, the American Society of Clinical Oncology and, just this week, the National Cancer Center Network have decided to add pricing data to their assessments of individual cancer drugs. Bach and his team devised an online calculator to assess the cost-effectiveness of various treatments, allowing users to choose from among a variety of criteria.
Again, not a drug company's problem, Read says; he has numbers for the economic benefits of cancer treatments, too. "I understand the physicians saying, 'Look, these prices are too high,'" the CEO told Forbes' Matthew Herper. "It's because their patients can't get access. That is an insurance issue."
Read isn't the only biopharma exec to point to the healthcare savings their products can generate. Amid an outcry over the $1,000-per-pill sticker price on its brand-new hep C treatment Sovaldi, Gilead Sciences ($GILD) maintained that the cost was reasonable, given the long-term savings on hep C complications, including sky-high costs for liver transplants.
Blaming insurers isn't unprecedented either, but it's something of a departure from the typical Big Pharma line about high sticker prices for drugs. The prices are justified--even for 6-figure meds--because of the costs required to develop the latest treatments, pharma execs usually say. Prices are higher in the U.S. because they have to be, to offset cheap drugs elsewhere in the world and generate enough money to support the next generation of R&D.
It's clear that drugmakers need to defend their pricing policies in some way, what with politicians setting their sights on legislation that would take aim at drugmakers' pricing power--not to mention a public that's suddenly quite focused on drug prices, partly in thanks to Turing Pharmaceuticals' outrageous 5000%-plus hike to the price on a 62-year-old toxoplasmosis drug.
Fact is, as Forbes points out, price hikes are a key strategy for Pfizer, as well as other pharma companies. More than one-third of Pfizer's revenue growth over the past three years has come from price hikes.
- see the Forbes interview