Orphan Drugs, Pricing, And Reputation Risk

By Crystal Benton

Even with the intense industry focus on COVID-19 pandemic treatments and vaccines, pharmaceutical companies have maintained a rapid pace of M&A. One of last year’s largest deals happened in late December when AstraZeneca acquired rare-disease specialist Alexion Pharmaceuticals for $39 billion. Acquisitions by larger pharmaceutical companies in the rare disease space, where high-priced medicines can generate billions in sales, have been an industry go-to for growth in recent years and are expected to continue. The percent of global branded prescription sales of drugs for rare diseases is growing more than twice the market rate of other branded drugs and is projected to account for more than 20 percent of all prescription drug sales in the next 24 months.

In its December issue, “Life Science Leader” asked 17 executives of biopharma companies what they saw as the most challenging political issues for the industry in the coming year and beyond. Nearly all respondents addressed implications around pricing: “There is no question that pricing will remain the biggest long-term issue going forward,” said Matthew Price, EVP, COO, and cofounder of Phosplatin Therapeutics. Philippe Pouletty, chairman of Abivax, built on the point, saying, “Political affirmation supporting the appropriate pricing and reimbursement for innovative, life-altering therapeutics is critical. If investors don’t see a route to competitive returns on their investments in biotech, they will exit biotech in favor of other industries.”

The pharmaceutical industry is experiencing an uncommon moment of reputational gain – a September 2020 Gallup poll found negative views of pharmaceutical companies fell to 49% (down from 58% in September 2019), and those expressing positive views increased to 34% (up from 27% in 2019). However, those gains already show signs of weakening as some world leaders seek waivers from international patent protections on COVID vaccines, while others challenge the industry’s position to even maintain their patents given the financial and regulatory support from the U.S. government and its taxpayers into vaccine development. And the headwinds don’t stop there, particularly with the new administration and Congress. President Biden’s drug pricing plan would establish an independent review board to assess the value of new specialty drugs that lack competition. Speaker Pelosi’s (D-Calif.) Lower Drug Costs Now Act, as well as Senators Chuck Grassley (R-Iowa) and Ron Wyden’s (D-Ore.) Prescription Drug Pricing Reduction Act could create seismic changes to Medicare drug pricing, which would change the shape of negotiations with commercial insurers as well.

With these headwinds in the marketplace, what impact might a potential spate of rare disease treatment launches have on industry reputation as its COVID halo fades? Reputation drag from ill-planned, high-cost launches could drain much, if not all, of the equity the industry has built through its efforts to rescue the world from the pandemic. And Washington has a notoriously short memory.

CEOs and CFOs look closely at improving capital efficiency of orphan drug development and the typically favorable risk-adjusted returns, but often don’t consider how these launches differ from a traditional drug launch. With a high-cost orphan drug the patient pool may shrink, but stakeholders multiply, as does the distinct risk of enterprise reputation damage and executive exposure that can result in business and market cap loss beyond the branded treatment being launched. Mitigating that risk requires an enhanced approach that goes beyond brand marketing, for which many companies are not prepared. Pharmaceutical company leadership should consider three shifts in their approach to the drug development and launch process.

Always-on corporate reputation management

Getting ahead of a crisis requires that companies introducing expensive therapies at a time of growing scrutiny understand and actively work to manage and build their corporate reputation equity. For established companies that may regularly measure and understand the drivers of their enterprise reputation, building further equity in the specific disease space is critical, especially when the expertise or treatments came through M&A. 

Reputation is often viewed as something that happens to you, not something you can actively shape. This miscalculation is one of 12 core insights identified by my firm, Purple Strategies, through interviews with corporate reputation leaders across industries – including pharmaceutical – in roles at both public and large private companies. Too often, companies begin managing their reputation only when crises occur, or critic voices attract their attention. Always-on reputation management can help companies stay ahead of emerging issues so they don’t turn into crises – central to that is understanding stakeholder expectations and proactive storytelling and engagement.

When companies fail to proactively and consistently tell their story, they leave a void. And the danger then is that their critics and dissenting voices may fill that void, taking control of and determining the prevailing narrative. This is particularly true when companies find themselves at the intersection of hot political topics, passionate patient advocacy groups, and families who’ve long-suffered with diseases that others struggle to understand or have little to no awareness of. Understanding stakeholder awareness and expectations of your company and its products – what information people already have when they intersect with your story – helps you regain control and influence outcomes.

Condition the market for launch of a specific treatment 

While the PDUFA date is typically the central milestone in launch timelines, it can’t be the first or last time critical stakeholders are hearing from your organization. Much work can and should be done ahead of when you are allowed to communicate about the treatment. Having a robust plan for unbranded communications is critical to the success of a branded launch.

Launching public-facing campaigns pre-PDUFA to raise disease awareness and build anticipation for new therapies is an opportunity to start a meaningful conversation with patients and KOLs, as well as stakeholders that may be outside of your brand team’s radar, from Congressional offices, to health policy elites, and even general population segments like healthcare charity supporters. Building this equity early can help mitigate criticism and even strengthen your position as you head into conversations with payers knowing you have influential voices on your side willing to fight for formulary inclusion.

Pre-PDUFA efforts can also help to demonstrate why the company has permission to operate in the given disease space. Sharing company leadership in a specific therapy area, the related  innovation and R&D, and your commitment to patients, builds trust – equity you will need if payers, elected officials or media take issue with your pricing strategy. Further, investing in unbranded communications will help the market understand your commitment to launch success and ease analyst concerns about the risk of political challenges to pricing and reimbursement.

Plan for issue management post-launch

Even the best laid plans are rarely without critique. Today everyone around the world is holding a publishing tool in their hand – stories can start anywhere, with anyone. The most important thing is that you are prepared to react. Being able to engage and present a counter narrative quickly is essential and requires thoughtful, integrated and facilitated scenario planning. Executing, should those scenarios or unanticipated ones arise, requires rapid response protocols and threat assessment tools that ensure appropriate weight is given, decision-making is clear, and action is streamlined.

Attacks on price are direct and resonate, so launch strategies for high-priced treatments must be built on multiple grounds to protect reputation equity. Traditional launch team structures will fail. A change in approach is required to meet the change in expectations.

Crystal Benton is a managing director at Purple Strategies — a corporate reputation strategy firm — where she works closely with senior business, public affairs and communications leaders at Fortune 500 companies and associations. She has worked in politics and corporate strategy for nearly 20 years and has extensive experience leading integrated reputation and market conditioning campaigns.