Pharma's role in cost control

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The $3 generic and the $1,000 pill: pharma outsiders just don't get it
Sander A. Flaum

Anyone connected to healthcare knows that costs are out of control. Of course, most of the increases are due to skyrocketing hospital costs, but I'm in pharma, so let's focus on drugs. The UK tries to hold down costs with its National Institute for Health and Care Excellence (NICE), but in the US we'll never see Medicare jawboning down the price of medicine. Nor would we ever want to.  So what's the answer?

A recent approach is coming from pharmacy benefit managers. Since it's now against the law for insurers to drop patients who become ill and exclude those who already are, they've been looking for ways to protect their pockets. But despite what pharma critics claim, insurers aren't afraid of the new generation of lifesaving biologics that cost $200,000 yearly and up. What terrify them are the ancient billion-dollar brands, like Glaxo SmithKline's Advair Diskus, that remain immune from generic competition.

This year, Express Scripts dropped Advair and other GSK respiratory drugs from its formulary, leaving Symbicort and Dulera. So, if your insurance provider uses Express Scripts as a PBM, you'll pay every dime out of pocket if you're prescribed Advair. Predictably, Advair's share plummeted.

It wasn't long before GSK came to heel. After seeing former Advair patients being switched to other brands with barely a murmur, GSK dropped its price and managed to get the drug back onto the 2015 ESI formulary—although it's still not “preferred.”

To pharma critics, this is no doubt highly entertaining, but vendettas focused on price and blind to value have the potential to cause long-term harm to our healthcare system, not only by undermining the role of physicians, but also by removing the incentive to develop new drugs. Even the New York Times lamented in a June 15 editorial, “Regulators need to watch out that insurers, in their zeal to curb drug costs, don't block patients from medicines they need when an alternative is not adequate.”

Maybe this is a wake-up call for more involvement. A little while ago, I learned of a survey conducted by a group called eyeforpharma. (You can find it on the Internet and download it for free.) They quizzed some 1,600 pharma executives from around the world and found beliefs that may be the seeds of tomorrow's trends.

For me, the most striking finding was that nearly 75% of execs predicted that pharma companies will need to enter the business of actually providing healthcare, and 85% believed we'll need to become more patient-centric.

Think about it. A model in which we helped to deliver healthcare couldn't be worse than our current model, with its baffling maze of regulations and our antiquated FDA lacking the tools, teeth, and courage to cope with the new drugs and drug combinations that are being minted almost monthly by the genomic revolution.  Can't we do better than PBMs, HMOs, and the ACA?

Perhaps it's time to blue-sky about how we can move beyond the industry we grew up in and adopt a model in which we help provide healthcare solutions. It's really our choice. Will we allow PBMs and their counterparts to push us around like the government bureaucracies we've always feared? Or will we take charge of our own destiny and grapple with the tough problems ourselves?


Sander A. Flaum, MBA, is principal, Flaum Navigators, and executive-in-residence and chairman, Fordham Leadership Forum, Fordham University Graduate School of Business Administration

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