Fair or not, haranguing drugmakers about the ‘high price’ of their wares is both a vote winner and safe harbour topic for populist politicians, and industry’s traditional ‘duck and cover’ response to rhetorical attacks like the one launched by Donald Trump on January 11 is looking increasingly feckless. An important first step to rebutting such criticism would be to push for comprehensive transparency, according to Celgene CEO Mark Alles.
Sentiment had been largely positive throughout this week’s annual JP Morgan Healthcare Conference, with companies expressing cautious optimism about the year ahead – some including Celgene outlining bullish financial projections – despite the political uncertainty that awaits. Any warm and fuzzy feelings were wiped away on the last full day of the industry gala when the president-elect took a break from rubbishing salacious but unsubstantiated rumours to rain on drugmakers’ parade.
“We have to get our industry coming back. Our drug industry has been disastrous,” remarked Trump, referring to the inversion mergers that have seen companies like Allergan and Mylan (and Pfizer—almost) re-domicile overseas for tax purposes. “They're leaving left and right. They supply our drugs but they don't make them here, to a large extent,” he added.
This alone would not have caused much of a fuss, as the US government has after all already taken steps to prevent this sort of deal by making them less appetising. Trump was just getting warmed up though, and transitioned seamlessly to the more important topic on his mind: drug pricing.
“And the other thing we have to do is create new bidding procedures for the drug industry, because they're getting away with murder,” Trump noted. “Pharma has a lot of lobbies, a lot of lobbyists, a lot of power. And there's very little bidding on drugs. We're the largest buyer of drugs in the world. And yet we don't bid properly. We're going to start bidding. We're going to save billions of dollars over a period of time,” he added.
Investors responded by running away from drug stocks, with the NYSE Arca Pharmaceutical and Nasdaq Biotechnology Indexes falling 2 percent and 3 percent, respectively, in the immediate aftermath.
Despite what some reports may suggest, this is not actually breaking any new ground for Trump, who mentioned on multiple occasions on the campaign trial his desire to allow the US Centers for Medicare & Medicaid Services (CMS) to negotiate Medicare Part D drug prices, which he estimates could be costing the government as much as $300 billion. (See ViewPoints: Careful what you wish for – Trump policies not all rainbows and butterflies for drug industry.)
The immediate reaction from some within industry will be to keep their metaphorical head down and avoid all eye contact in the hopes that the storm eventually blows over, while still others will quietly make calls to ensure that the torpedoes – otherwise known as lobbyists – are manned.
Celgene’s Alles outlined an entirely different strategy in a sit-down discussion at this week’s conference, stressing the need for industry to proactively pursue “comprehensive transparency” about where each and every dollar is being spent on healthcare in the US. Implicit in this argument is his belief that innovative medicines like the company’s multiple myeloma drug Revlimid (lenalidomide) are well worth the prices being charged.
Indeed, studies have consistently shown that drugs represent a small – albeit growing – portion of overall healthcare costs, and also point to the fact that medicines are typically one of the most cost effective means for preventing and treating disease.
“We welcome comprehensive transparency on the costs of medicines all along the healthcare continuum,” said Alles, suggesting the need for more disclosure goes well beyond drugmakers and must also include the likes of distributors, health insurers and pharmacy benefit managers, the latter of which have been a focus of some recent controversies. (See JP Morgan 2016: Why the Anthem, Express Scripts kerfuffle could be massive headache for all PBMs and ViewPoints: Pfizer chief – PBM rebate process needs revision.)
Some companies may instinctively shy away from seeking this level of clarity, whether out of habit or because they lack confidence in the value that their medicines bring to the table, though the first group will need to evolve their thinking and the second will simply be forced to innovate or perish.
“Incentives have to remain in place for biopharma to take risks, and for investors to provide the capital for them to do so,” and the successful drugs are a key renewable resource capable of generating revenues that can ploughed back into a company’s R&D, thereby maintaining the health cycle of life of drug development.
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