Drugmakers explore response to pricing debate

(From left: Nancy-Ann DeParle, Dr. Peter Bach and Kenneth Frazier participate in the Prix Galien Forum panel in October in New York City.)

Turing Pharmaceuticals' decision to raise the price of a drug by 5,000% not only sparked intense questions about the rationale for high prices on new and old medicines. The controversial move by the private drugmaker, and by its now-infamous CEO, also prompted other companies to distinguish themselves by more firmly justifying how they price their medicines.

Consider recent remarks by Merck CEO Kenneth Frazier.

Frazier noted during the Prix Galien Forum in New York City in October that Turing did not invest in additional research and development or meet any new unmet patient needs when it raised the price of antiparasitic Daraprim from $13.50 per pill to $750.

“We go through that framework,” he said, seeking to distance the seventh-largest drugmaker in the US from Turing.

To be sure, using innovation in the lab as a rationale for prices isn't new. Most drugmakers have generally stuck to that defense, highlighting their investment in R&D and promoting the benefits an innovative drug can have in the lives of patients. But drug development is becoming a way to distinguish companies that have billion-dollar research budgets from their erstwhile industry peers that do not.

All drugmakers including Merck are under increased scrutiny to defend and explain their drug-pricing practices in light of the Turing price hike and several other highly publicized pricing decisions, such as Valeant's repricing of heart drugs Nitropress and Isuprel and Gilead Sciences' decision in 2013 to give its hepatitis-C cure Sovaldi a $84,000 price tag.

They are now making business decisions that seek to take up the issue of high drug prices and evaluating new models, like indication-based pricing and risk-sharing contracts. Although some of these examples pointedly highlight gaps in other areas of the healthcare system, such as rising cost-sharing for patients, it's unclear how effective such moves will be in light of the volume of criticism about pricing. However, the announcements demonstrate that drugmakers seek to get involved in the broader debate about pricing as more active participants.

Other pharma companies are starting to veer from the usual script, as well. “There has been a lot of attention on the issue of drug pricing,” Pfizer CEO Ian Read told investors during a third-quarter earnings call. “I believe good public policy will prevail, ensuring the best outcome for patients while preserving a market-based system that enables the industry to continue developing new treatments and cures. However, that policy discussion must take into account the role of medicines and the value they deliver to the overall healthcare system.”

In a recent op-ed for Forbes, Read also suggested that insurance companies share the responsibility for issues that patients have in accessing medicines.

Read, Frazier and a handful of influential pharma executives, including the CEOs of Biogen, Eli Lilly and Roche, used the third-quarter earnings season to promote their corporate investments in R&D.

Weeks later Pfizer announced that it had doubled the income level for its financial assistance program for patients. Now a single person making $47,000 or less or a family of making $97,000 qualifies for certain free medicines from Pfizer.

“While patient assistance is not a permanent solution, it is a necessary step for helping to solve some of the high co-pay issues that some patients face,” Sally Susman, Pfizer's EVP of corporate affairs, said in a news release. “The real solution is to have a system that provides patients with access to innovative new treatments their doctors' prescribe and insurance plans with good coverage.”

Amgen said it reached an agreement with Harvard Pilgrim Health Care that ties the performance of Amgen's newly approved PCSK9 inhibitor, Repatha, to how much the insurer will pay for the drug. “Agreeing to pricing models that align payment with appropriate outcomes is critical if we are to better manage increasing drug costs,” Harvard Pilgrim Chief Medical Officer Michael Sherman said in the release.

While new in scope, these strategies are considered experimental at best, at this point, said Roger Longman, CEO of Real Endpoints.

“The real question that everyone is trying to avoid right now is pricing,” he added. “That's the subject they're all stepping around, trying not to create some kind of first step for price controls or inflation guarantees.”

Lawmakers, including presidential candidates Donald Trump and Hillary Clinton, have pilloried Turing's move or, in the case of Clinton and Bernie Sanders, called for legislation that would allow Medicare to negotiate drug prices. Critics argue that most drugmakers spend between 15% and 20% of their revenues on R&D, of which a large percentage is used to the make “incremental changes to products they already have,” Dr. Aaron Kesselheim, associate professor of medicine at Harvard Medical School, said during a recent Harvard webcast.  

These calls for legislation may be one reason why more drugmakers and experts are talking about the need for value-based pricing and indication-based pricing and considering risk-sharing agreements. A viewpoint published in JAMA in 2014 highlighted the difference in using Celgene's Abraxane to treat metastatic breast cancer and metastatic non-small lung cancer. The improvement in survival for lung-cancer patients taking the drug is less than half of what it is for patients with breast cancer.

“Adopting indication-based pricing is thus technically feasible,” Dr. Peter Bach, director of Memorial Sloan Kettering's Center for Health Policy and Outcomes, wrote in JAMA. “Political challenges may be more substantial.”

Better access and insurance as well as value-based pricing are two ways to address concerns about high drug costs, Frazier said at the Prix Galien forum, where he spoke on a panel with Bach.

“Not all drugs are priced on value,” Frazier said.


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