Coming In September: The Inside Story Of How Allergan Built Its Social Contract

By Rob Wright, Chief Editor, Life Science Leader
Follow Me On Twitter @RfwrightLSL

In the upcoming September issue of Life Science Leader, we will feature an article on how Allergan’s Chairman, President, and CEO, Brent Saunders, conceived and created Allergan’s now-famous social contract. You’ll likely be stunned at the approach that was taken and how quickly it was executed.

To prepare you for that article, we’ve obtained Allergan’s permission to publish the social contract here in its entirety.   Remember, though, only paid subscribers will be able to access the September issue’s article on Saunders and Allergan, so if you are not yet a subscriber to Life Science Leader magazine, go here to subscribe at a special rate .

Our Social Contract With Patients
September 6, 2016

Lately, there has been a tremendous focus on the cost of medicines and some of it has been very appropriately targeted at those outliers who have taken dramatic price increases – or engaged in what the public thinks of as price gouging, especially on life saving medicines. I understand the public outcry and add my voice to the condemnation of these behaviors. In this blog, I want to address my commitment to innovation, access and responsible pricing ideals.

Recently, the actions of these outliers have shifted attention away from the increasingly vibrant medical innovation ecosystem focused on finding new medicines, improving outcomes for patients and, by doing so, lowering the overall cost of disease. That drug discovery and development ecosystem is made up of good people working in companies, big and small, who want to do good for others. In fact, all the people I know in the biopharma industry come to work because they have a dream of helping people. As the focus on price has heated up, the innovation ecosystem has come under assault, and it is fragile. This ecosystem can quickly fall apart if it is not continually nourished with the confidence that there will be a longer term opportunity for appropriate return on investment in the long R&D journey.

The health care industry has had a long-standing unwritten social contract with patients, physicians, policy makers and the public at large. Basically, in this social contract patients understood that making new medicines required significant investment. . At the same time companies, doing the hard, long and risky work of bringing new medicines to market, understood that they had to price medicines in a way that made them accessible to patients while providing sufficient profit to encourage future investment. It was designed to be a win-win-win. New medicines for patients. Lower overall cost or damage of disease. An appropriate return on capital for those taking risk by investing time and talent in the arduous and uncertain task of developing new treatments.

Those who have taken aggressive or predatory price increases have violated this social contract!

I don’t like what is happening, and despite the fact that it is hard to speak out publicly on this, now is the time to take action to spell out what this social contract means to me. By doing so, I am conveying to my Allergan colleagues that we must keep this social contract in mind as we make business decisions that ultimately improve wellbeing, and as a result, address the hopes others place in us.

For me, there are four principles of this social contract. And, I am committed to reaching out to a broad range of stakeholders to add further dimension to what our social contract means. I’m committed to living by these principles.

Principle 1: Invest & Innovate
Principle 2: Access & Pricing
Principle 3: Quality & Safety
Principle 4: Education

1. Invest & Innovate
Our social contract begins where there is a patient with an unmet need. As we identify needs in our areas of expertise, we are committed to risking billions of dollars to develop life-enhancing innovations. We will do so in the U.S. and around the world. And, we use our Open Science model to access promising inventions that exist outside of Allergan. That means rewarding the scientists, start-up companies, academic institutions, investors and partners for the work they have put into the original invention, which becomes part of the cost of developing life enhancing innovations.

And, by the way, that investment doesn’t stop when a drug is first approved by a regulator. For many treatments, we invest more money in R&D after regulatory approval than we do before the first regulatory approval. For example, while our product Vraylar was recently approved to treat bipolar mania and schizophrenia, we continue to make major investments to study Vraylar for other mental health conditions where it may help people – these include major depressive disorder, bipolar depression and negative symptoms of schizophrenia. There is no guarantee that any of those studies will yield new approved treatment options for patients. That is the risk we take when we invest hundreds of millions of dollars to develop medicines. But for us, it is still a risk worth taking. As important, it is our responsibility as part of the social contract with people who are hoping for a better, healthier life.

2. Access & Pricing
We commit to making these branded therapeutic treatments accessible and affordable to patients while also ensuring that we can continue to meet our ‘invest and innovate’ obligations outlined in Principle 1.

Providing our treatments to patients is not a straightforward exercise. We have to go through many decision makers and intermediaries to make sure that our products are available to the patients who need them. That means government payers, regulators, private insurers, and PBMs to name a few. We commit to working with decision makers and intermediaries to make our products accessible to all people who need them. This often includes giving discounts and paying rebates. The current pricing environment is highly competitive with large payers making decisions that may limit patient access to our medicines in favor of a competitor based on the latter’s willingness to pay more rebates. In order to ensure that patients and physicians have access to a full array of medical options, we believe that these intermediaries should have open access to formularies whenever possible.

We commit to these responsible pricing ideals for our branded therapeutics.

• We will price our products in a way that is commensurate with, or lower than, the value they create by mitigating or avoiding the need for other treatment modalities or providing better quality of life to those patients without other treatment options.
• We will enhance access to patients. This means that Allergan will enhance our patient assistance programs in 2017 to match the current industry leader(s).
• We will work with policy makers and payers to facilitate better access to our medicines.
• We will not engage in price gouging actions or predatory pricing.
• We will limit price increases. Where we increase price on our branded therapeutic medicines, we will take price increases no more than once per year and, when we do, they will be limited to single-digit percentage increases. Our expectation is that the overall cost of our drugs, net of rebates and discounts, will not increase by more than low-to-mid single digits percentages per year, slightly above the current annual rate of inflation.
• We will not engage in the practice of taking major price increases without corresponding cost increases as our products near patent expiration. While we have participated in this industry practice in the past, we will stop this practice going forward. Where new regulatory requirements impose added costs, we will seek to reflect those costs in our pricing.
• We commit to providing an aggregate view of the net impact of price on our business at least annually.

3. Quality & Safety
We commit to intensely monitoring the safety of our medicines, before they are approved by regulators and afterward. We commit to promptly reporting and acting on new safety data so that patients can trust our medicines. We also commit to maintaining high standards of quality for each of our products. And, we commit to maintaining a continuous supply of our medicines by investing to expand manufacturing capacity of our products, either directly or through our manufacturing partners.

4. Education
We are committed to appropriately educating physicians about our medicines so that they can be used in the right patients for the right conditions. This is an ongoing effort and one that we take pride in doing well because outcomes matter to everyone; patients and their advocates, physicians, payers and policy makers. I will talk more about our education principle in a subsequent blog.

There is no joy on my part when a company finds itself in the public spotlight – the target of societal ire. I take comfort in reading about new treatments that improve and save lives. The public’s expectation is that we exist to heal and cure. It’s an expectation that mirrors our own.

Our biopharma industry is vital and has made profound contributions that have increased life expectancy and dramatically improved health during the last generation. For me, it is a special privilege to work in this industry at this time of bubbling science and exciting innovation. For our industry to remain a vibrant and important part of the healthcare ecosystem, Allergan commits to this social contract and I encourage others to formulate their own self-policing actions. It is good for Allergan, and it is also vital for our most important constituents – the medical professionals and patients who count on us to continue finding new treatments for their most pressing medical needs.