By John McManus, president and founder, The McManus Group
JM: You took the helm at PhRMA just as the firestorm over pricing erupted, particularly with the aggressive pricing strategies adopted by Turing and Valeant. Some politicians have tried to capitalize, claiming that Turing’s and Valeant’s actions are endemic to the pharmaceutical industry. What is PhRMA doing to educate the public and policymakers and correct the narrative?
SU: As I have said before, Turing and Valeant are essentially hedge funds masquerading as pharmaceutical companies. Yet some have used these isolated examples to advocate for sweeping change in public policies that risk slowing the progress we have made against disease and would delay the development of the next generation of treatments and cures for patients.
The patient perspective should be front and center in any healthcare policy discussion. This is an exciting time for biopharmaceutical innovation with new medicines that are completely transforming care for patients fighting cancer, hepatitis C, heart disease, and other debilitating ailments. With our “From Hope to Cures” campaign we are hoping to educate policymakers in Washington, D.C., about the positive impact new medicines have on patients and the healthcare system. Too often the debate ends up focusing only on dollars and cents and ignores the patient perspective. Without a better understanding of the value new medicines and treatments provide, we face a greater risk of public policy changes that would inhibit innovation and harm patients.
JM: For years the industry was criticized for producing “me-too” drugs in crowded therapeutic classes. Yet recent transformative cures, like new HCV (hepatitis C virus) products, have been pilloried the most! How much of this anger surrounding the price of these cures is related to the list price and how much is toward the out-of-pocket expenses imposed by health plans?
SU: Unfortunately, we have seen a rapid rise in the number of health plans with high deductibles for medicines – doubling in just the last three years. For patients with a combined deductible of $2,000, they are faced with paying on average 46 percent of their pharmacy costs out of pocket compared to just 28 percent of their hospital costs. Patient assistance programs sponsored by America’s biopharmaceutical research companies are one option to help patients maintain access to needed medicines if they are uninsured or underinsured.
With that said, focusing solely on the list prices of medicines is misleading because it ignores the significant discounts and rebates negotiated by insurers and pharmacy benefit managers. A new report from the IMS Institute found net prices for brand medicines increased just 2.8 percent in 2015, down from 5.1 percent the prior year as discounts and rebates negotiated by payers rose sharply. Similarly, CVS Health and Express Scripts recently reported actual medicine spending growth in 2015 was less than half from the prior year. This is due to a competitive marketplace for medicines where large, powerful purchasers negotiate aggressively and generic utilization rates are nearly 90 percent.
JM: It seems that some in the PBM (pharmacy benefit manager) industry are fanning the flames on antipharmaceutical rhetoric. They are bemoaning the rise of “specialty medications” and claiming new medicines will bankrupt the healthcare system and wreak financial havoc. What’s this really all about?
SU: Recent comments from PBMs and insurers disprove misleading claims previously made about spending on new innovative medicines. For example, over the past year, payers claimed life-changing treatments and cures for hepatitis C and high cholesterol would bankrupt the healthcare system and wreak financial havoc. Yet Express Scripts, the nation’s largest PBM, now touts hepatitis C treatment is less expensive here than in western countries thanks to its aggressive negotiation. And last year it touted it can include both new cholesterol-lowering medicines, called PCSK9 inhibitors, on its national list of covered medicines thanks in part to substantial negotiated discounts. The bottom line is private negotiations between manufacturers and payers drive our competitive marketplace and provide patients with access to a broad range of innovative new treatments and cures.
JM: Should the pharmaceutical industry adopt a more aggressive approach to PBMs, as the Anthem-Express Scripts litigation has provided a glimpse that patients may not be benefitting from rebates provided to PBMs?
SU: In the biopharmaceutical market, large, powerful PBMs have the ability to negotiate significant discounts and rebates, establish formularies, and incentivize patients to use lower-cost generic alternatives. In fact, the top three PBMs manage 75 percent of all prescriptions filled. At the same time, the introduction of high pharmacy deductibles has led to major changes for patients. In the exchanges created by the ACA, patients often face deductibles of $3,000 or more without the benefit of an employer contributing to an HSA to help defray the out-of-pocket costs. Patient assistance programs sponsored by America’s biopharmaceutical research companies are one option to help patients maintain access to needed medicines if they are uninsured or underinsured.
Ultimately, private negotiations between manufacturers and payers drive our competitive marketplace and provide patients with access to a broad range of innovative new medicines and foster the development of new treatments and cures patients desperately need.
“Recent comments from PBMs and insurers disprove misleading claims previously made about spending on new innovative medicines.”
JM: The Obama administration has proposed a nationwide “experiment” on Medicare Part B physician-administered drugs that would impact three in four Medicare physicians and their patients, many of whom have cancer and other serious ailments. Do you think the administration has properly focused on a “defined population where there are deficits in care leading to poor clinical outcomes” as required by the Center for Medicare and Medicaid Innovation (CMMI) statute for such demonstrations?
SU: The proposed Medicare Part B payment model marks a dramatic departure from CMMI’s usual voluntary testing approach. Mandating broad changes for the majority of Medicare beneficiaries is government overreach.
This proposal would come between providers and patients by allowing the government to make one-size-fits-all value judgments about the best care for Medicare patients. As new medicines become available, especially new targeted and personalized medicines, like President Jimmy Carter’s recent cancer treatment, Medicare physicians and patients should have those options available to them.
Finally, the Medicare Part B payment method is market-based and works well to control costs. Part B spending growth is not driven by prescription medicines, and spending on medicines has remained below medical inflation. Instead, rapid provider consolidation and changes in site of care are driving up costs for patients and Medicare.
JM: We are now seeing state ballot initiatives that would cap pharmaceutical prices to state governments at the level provided to the federal Department of Veterans Affairs. It seems there is very little understanding of the different payer systems — it’s like France demanding the Greece price. What is PhRMA’s position on these initiatives?
SU: We have serious concerns about these measures and the potential impacts they will have on patients’ access to medicines and future innovation. In California, we are part of a growing coalition of groups opposed to this November 2016 ballot measure because it will negatively impact millions of Californians.
JM: We’ve seen the 340B program expand dramatically in just a few short years. A number of government reports have expressed concern about lax oversight and potential abuse of the program. Physician groups have also argued that 340B has fueled provider consolidation and undermined competition. How is the pharmaceutical industry tackling this issue?
SU: The 340B was created to help vulnerable or uninsured patients access needed prescription medicines. Unfortunately, the program has strayed from its core mission and is growing dramatically, with hospitals responsible for much of the growth — while clinics receiving government grants largely use the program appropriately to improve access to medicines and support the worthy missions described in their grants. Thoughtful reform is needed to ensure the program benefits the patients as was intended. We are committed to working with congress and the administration to address the 340B drug discount program and its market-distorting effects. Core areas of reform include a better patient definition, addressing hospital eligibility criteria, slowing growth of contract pharmacies, curbing provider consolidation, and increasing oversight and accountability in the program.
JM: How are you trying to reshape PhRMA? What should it stand for or against? Give us a glimpse into how you are trying to execute on that strategy with some hires you’ve made or priorities you’re emphasizing.
SU: I want my tenure to be marked by PhRMA playing a leadership role in advancing pro-consumer, pragmatic policies that enhance the private market and address costs holistically. PhRMA has been viewed as very effective at defeating bad policies, but I think we can do a better job advancing a set of proactive policies.
There is a right and a wrong way to find real solutions for America’s patients. The wrong way are policies that distort, rather than enhance, the private market such as de facto price controls or importation, and as a practical matter, these ideas have been rejected on a bipartisan basis by agencies like the CBO (Congressional Budget Office) and FDA. Instead we need to concentrate on pragmatic proposals that increase competition, modernize the FDA, remove barriers that limit paying for value, address market-distorting programs like 340B, and empower and engage consumers with information to make better informed healthcare decisions. If we focus on these issues, we can enhance the private market and improve patient access to high-quality, patient-centered care.