A sound-bite culture, a devious insurance industry and a complicit media are why the pharmaceutical industry has an approval rating lower than the US Congress, according to speakers at “The Great Pricing Debate,” Monday’s luncheon plenary at Biotech Showcase January 11 in San Francisco, moderated by Michael Griffith, Executive VP at inVentiv Health, and president of the company’s commercial division.
“To have a situation in which people rate us below Congress is an abomination and a perversion of reality. In no means are we accountable for most of it,” said Ron Cohen, MD, CEO, Acorda Therapeutics and chair of the Biotechnology Innovation (formerly “Industry”) Organization.
The real problem is the pricing discussion is not only complicated, but convoluted. “It’s not like buying a handbag, with only a retailer, wholesaler and manufacturer in the supply chain,” emphasized Sara Radcliffe, president and CEO, California Life Sciences Association (CLSA). Additionally, “there’s an extraordinary disconnect between the buyer and every other aspect of the healthcare system. There’s no way to be an informed decision maker without a lot of help.”
The discussion about healthcare costs has been the same the past 100 years, “so why are things different now?” Radcliffe asked. The answer, she said, is restricted access by insurers. “Insurance companies and employers have adopted designs that expose patients to a greater and greater proportion of the costs in an effort to contain those costs.”
Cohen had a more sinister explanation. “The American health insurers group has had a strategic plan for a few years to shift blame for high healthcare costs onto the pharmaceutical industry.” This, he said, is an effort to deflect attention from their own practices of “denying access to patients, to drugs and to services through tiers, prior authorization requirements, step edits and co-pays that patients can’t pay, so they leave the drug on the counter.
“We are not the problem,” he insisted. “Pharmaceuticals account for merely 10 to 14 percent of healthcare costs. Hospital costs account for 30 percent and are two to three times higher than anywhere else in the world, yet I haven’t seen news stories about hospital monopolies.”
Rather than demonize the pharmaceutical industry for expensive drugs, Cohen said the question society should be asking is how much we, as an advanced society, are willing to pay for healthcare as a percentage of our gross domestic product (GDP)? “We spend 18 percent of our GDP on healthcare, compared to 10 to 14 percent in other industrialized nations.”
Historically, the pharmaceutical industry has explained the cost and risk of developing a single drug – currently 10 to 15 years and more than USD 2 billion, and a success rate of perhaps 1 percent. That’s not a story for sound bites. Instead, the pharmaceutical story should be one of value and innovation, panelists agreed. Innovative therapies like those being developed today can reduce costs throughout the healthcare system by diagnosing disease earlier, when it is most treatable, and by personalized medicine approaches that match the drug to the patient for earlier and more effective treatment. When such benefits are measured against the total costs of the traditional healthcare environment, the high cost of a cure for hepatitis C, for example, is a bargain.
Of course, panelists agreed, everyone wants that bargain even cheaper. Showing that no good deed goes unpunished, Gregg Alton, executive VP, corporate and medical affairs, Gilead Sciences, Inc. talked of sending very low cost drugs to India and Africa to eradicate hepatitis C. The company is being excoriated because these drugs aren’t being reimported into the US. Detractors, he said, don’t understand that the higher prices of the US market subsidize the therapies for countries that otherwise could not afford them. (Although Gilead doesn’t tout it, low-cost programs exist in the US, too.)
To foster innovation, the possibility of high returns, and thus high prices, is a necessary attractant for investors. “Of the 1,300 biotech companies existing today, perhaps 97 percent aren’t profitable and most will fail,” Cohen said. “If you want a cure for cancer or the next breakthrough for Alzheimer’s disease, someone will have to pay for it.” That means investors, who expect sizeable returns for the length of the patent, commensurate with their risks. “Without outsize returns, nobody will invest.”
Although there’s talk that government may place pricing limits on the pharmaceutical industry, Beth Roberts, partner at the Washington, DC law firm, Hogan Lovells, said she believes the outlook is “quite good.” Patients want those cures, and the desire to innovate is fundamental. “This is an issue of affordability, not cost,” Roberts continued. The healthcare system is shifting toward integrated care and a “pay for value” model, which should enhance efficiency.
“Stakeholders are working with agencies and Congress now to help solve the high costs of healthcare but,” Roberts said, “there are legal restraints concerning discussions of pharmaco economic benefits that impede our ability as an industry to be part of the solution.” Change isn’t likely short-term. “The Administration is limited in what it can do and Congress isn’t united, so the debate will continue.”