Can We Afford The Cures Biopharmaceutical Companies Seem Capable Of? Part 3 of 4
By Rob Wright, Chief Editor, Life Science Leader
Follow Me On Twitter @RfwrightLSL
I often wonder if the biopharmaceutical industry is a victim of its own success. After all, the industry has changed the AIDS epidemic from a certain death sentence to a manageable chronic disease, and yet, the political climate seems to only focus on the cost, not the cure. Not long ago I had the opportunity to sit in on a conversation between a bunch of biopharmaceutical heads of R&D. I recorded the discussion and had it transcribed and developed it into a four part article, being sure to keep participants included in an anonymous fashion. In part1, the focus revolved around what has changed in biopharma R&D, and lessons learned from Gilead’s Sovaldi launch and price. Part 2 looked at some of the hurdles the biopharmaceutical industry faces, and some of the differences that exist between copyright and patent laws. In part 3, we continue the discussion by exploring if governments should play a greater role in pricing regulations, and evaluate the challenges presented in being able to create a product that is accessible in a market. What follows is a behind-the-scenes look at some of the challenges being faced by executives trying to develop drugs in today’s current R&D environment.
Should the U.S. Government Start Regulating Price?
If you go to a hospital, there’s a 95 percent chance that you’re going to have coverage. However, if you buy a drug, there’s an 80 percent chance or less that it will be covered by your insurance. Because some of these drugs are pretty expensive, some wonder if governments should start regulating the price in order to help consumers. “Many companies have programs, so that if people aren’t covered or they don’t have the coverage to get the drug, they will be able to get the drug covered,” shares a head of R&D. “Once again though, I think a lot of people don’t understand this well enough.” Another adds, “This is one of those parts of the communications piece that payers, insurances, and PBMs are using to win the communications battle with patients. They’ve been able to deny payment or ask for copayment, and then point to our industry and say, ‘Well, unfortunately the prices are so high and have gone up so much that this is what we have to do.’ They have not been able to do this with hospital payments, and why biopharma shoulders the bulk of the blame.” Another R&D head adds, “The whole structure of how prices are actually determined and who gets blamed for them, appropriately or inappropriately, is a huge morass that has yet to be exposed. We recently brought a new innovative medicine to market that is a completely new class of drug. To help you understand how the conversation has changed from the inside out, when we talk about how to price these things, you now have to price them so the PBMs actually get their cut of the rebate, which means that they want you to price it so it appears falsely higher. When you then provide something like a 50 percent discount, they take the credit for lowering the drug’s price. It’s really outrageous how few people really know this. PBMs and insurance companies come out looking like heroes by “asking” us to artificially inflate our prices so they can communicate to their customers, this is what the drug companies charge, but this is what we paid. Because all of us [biopharma] are so scared to go at war with some of these other players, we let them go out and blame us for the high prices, which in reality they actually set. As an industry we have to do a better job of figuring out how to get this story out, because right now we are getting blamed for being the bad guys.”
What About The Question Of Market Access?
“I was involved with some of the early discussions with NICE before it was actually set up,” relates one head of R&D. “The basic concept of saying we’re paying for what we want and getting it quickly and keep costs on the rest, seems perfectly reasonable. But it has since become an unbelievably complicated. For example, there is a deliberate delay in the process before getting approval to reduce costs. Further, we have fragmentation of access requirements across Europe, which in the end, makes a mockery of having a unified regulatory system. We’ve got a really big mess there, and I don’t see it getting sorted out very quickly. One of the biggest problems though is how this is actually causing huge health problems that result from delaying treatment, something that doesn’t seem to be coming up during various political debates. I don’t see NICE or most European access systems getting any easier any time soon.”
Two things that seem to be in conflict with each other are market access and innovation. “On the one hand you have the need to develop tools to control costs, and then on the other hand you have the need for innovation, as this is what modern societies are based,” shares an R&D head. “They are fundamentally in conflict with each other. What you see in market access is what I call the deaf mute debate, because they give you reason A for why they won’t accept/reimburse, but reason A is not the reason. The real reason is because they need to control costs. The reality is that NICE is a cost control thing. Let me give you a crazy example. Suppose tomorrow we discovered a pill that would wake up the dead. What do you think the market for such a product would be? But because everybody would be living longer, it would probably ruin every government budget and would be an absolute nightmare for market access organizations. There is a lot of demand to include real world effectiveness studies in your Phase 3 data that’s going to show value. The problem is that we haven’t even agreed on what the definition of value actually is. Regulatory is just another way of preventing innovation from reaching the market because the reality is that greatest enemy of reducing government healthcare costs in the near term is innovation.”
Another executive chimes in, “There’s all this talk about healthcare costs breaking countries’ economy and the world economies and so forth. There’s this enormous focus on the drug part of rising healthcare costs. To my understanding, drugs represent, at most, 20 percent of the total, and yet that is where the bulk of innovation in healthcare is coming from. While you’re sitting in the hospital and you’re paying for your room or procedure, there’s very little innovation taking place in those areas that are reducing healthcare costs in the long term. What happens to a patient’s perspective when they are actually denied drugs that are potentially lifesaving or life-altering that could actually lower other healthcare costs? The people who are preventing patients from getting those drugs aren’t the drug companies, because we have systems in place to help patients when they can’t afford the product. It’s others, such as payers, that are actually preventing patients from getting drugs.”
“Look, when you have these types of conversations, we tend to be saying, “Why don’t people understand that we are doing all this great stuff?” asks another R&D head. “There must be another side to this coin, and I really wonder whether we’re talking early enough to the people involved in healthcare. Are we doing enough with our own companies to truly understand the patient’s perspective, and doing the work in our development programs to meet their demands? Let’s be clear, there is a cost reduction agenda taking place. But we shouldn’t make it as difficult as possible for that to happen. Conversely, we shouldn’t make it too easy either, otherwise other industry players will not have to work to reduce their own costs, because we will have taken on a majority of the burden.”
“If you look at the PhRMA and BIO [websites, you’ll see campaigns, like Innovation Saves, as an effort for industry to improve upon its messaging,” shares another executive. “PhRMA is investing a lot on largely targeted messaging, but not only is it expensive, it can also backfire (e.g., Why are you running TV commercials instead of lowering the price of your drug?) It’s not a simple problem.”
“There are four pillars in healthcare — hospitals, providers, payers, and patients — and only one of these, the patient, is aligned with the biopharmaceutical industry,” shares another. “When you define a communications strategy, you need to find out who the ultimate friend is to what you do, and I believe these are the patients, because they do want a pill that could wake up the dead.”