4 Ways to Create a Sustainable Pricing Model

Mike Luby, president and CEO, BioPharma Alliance (left)

Pricing has moved to the forefront of the pharmaceutical debate in part due to bad behavior. It's easy to slap Turing around because it's led by a young hedge funder who behaved recklessly. A number of other companies, led by people who should known better, have also been reckless with pricing, offering value propositions that would make all of us blush. Today the key to a sustainable pricing model is simply equating price with a drug's value proposition. That is, does the drug offer value that is commensurate with its price, measured against the market and/or its impact on healthcare. It's easy to focus on $1,000 for a “pill,” as many do in the case of Gilead's hep.-C products. I see a value proposition that is easy to defend—the $84,000 cost for 12 weeks of treatment cures patients of a difficult disease. The formula's pretty simple: Be sure you can defend your drug's value proposition, without blushing.

James Sharples, vice president, Delta Marketing Dynamics

It's a challenging time for pharmaceuticals concerning pricing. Between the egregious pricing actions of Turing Pharmaceuticals, multiple investigations of different pharmaceuticals' pricing strategies and the fact that the US is in an election cycle, “appropriate” pricing will most likely stay in the spotlight for the foreseeable future. While all stakeholders are primarily focused on improving patient outcomes, other issues come into play that may cloud agreement on what a product's “true” value is. The need to balance the innovation of pharmaceutical companies with the impact expensive products have on the healthcare system requires all stakeholders to come together and work on an agreed-upon definition of value. If the definition of value is not balanced for all stakeholders, the system will not be sustainable.

Jeremy Schafer, VP, director of specialty solutions, Precision for Value

Specialty products originally commanded high prices because the eligible patient population was expected to be small. As the specialty market grew, medications for more prevalent conditions were released but were ­pricey. Cost concerns have been further compounded by off-label prescribing. Because of these changes, new specialty products are managed tightly upon release, with prior authorization, high-cost share tier and other tools that may create barriers for all patients—not just those inappropriate for therapy. For specialty pricing to remain sustainable, a joint effort by providers, manufacturers and payers is needed to ensure a product is used only when strong clinical data supports it. Improved data sharing and integration could create fast tracks for appropriate patients while maintaining barriers to inappropriate use.

Jay Carter, SVP, director of strategy services, AbelsonTaylor

The central component that drives a sustainable price for anything is value. Especially for specialty drugs. Pharma has driven better outcomes and always will. We price to capture that value. Truth is, the lightning rod for this discussion, Daraprim, is certainly worth more than $13.50 a day. It might be worth $750 a day. The problem wasn't the value provided; it was the ham-handed way Turing chose to raise the price. Here's another truth: Pharma works to undermine sustainable pricing for a living. New innovative products like Harvoni and Sovaldi commanded a high price … until a competitor drove the price down. Once AbbVie's Viekira Pak was launched, competition with PBMs drove discounts sky-high. One analyst's estimate: 46%.