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Following the backlash over the Turing Pharma drug price rise, the healthcare industry can not afford to ignore the signals and must carefully consider what to do next, writes Meg Alexander.
It seems clear that most people don’t care that it takes two billion dollars to develop a drug. A similar case was presented last week by Turing Pharmaceuticals when it defended a 5000% price hike in its drug Daraprim, a 62-year-old medicine for treating toxoplasmosis, a form of infection common among immune-compromised patients, including those with HIV.
The chief executive officer’s justification of future R&D costs and return on investment didn’t help people rationalize a price increase from $13 to $750. The increase created a firestorm and sparked national media uproar, propelled patient advocacy group online commentary and generated policy announcements from the leading Democratic presidential candidate this week. Those of us in the healthcare industry may not be able to afford to ignore the signals and must carefully consider what to do next.
Americans are expressing their frustration loud and clear over drug costs. Nearly 3 out of 4 people in a recent survey expressed concern about the high price of prescription drugs and Drew Altman, president and CEO of the Henry J. Kaiser Family Foundation, has said that “people favor virtually any action we poll on that they believe might reduce drug prices.”
Who do they blame? Manufacturers, according to people in both political parties. A Kaiser Health Tracking poll from August showed that the pharma industry’s reputation is now lower than the reputation of airlines and banks.
Both Former Secretary of State Hillary Clinton and Senator Bernie Sanders (I-VT) are tapping public ire. The Turing story hit the New York Times on Sunday, was picked up by hundreds of media outlets and spread across the internet like a wildfire. Within 48 hours, Clinton tweeted 21 words announcing her intent to curb ‘price gouging’ and promising a full plan. The tweet sent the Biotech Stock Index tumbling more than 4% for the day.
Turing’s CEO said the additional revenue was needed to offset the high costs of R&D. But by Tuesday evening, the company had capitulated to public pressure and said it will lower Daraprim’s pricing by an unstated amount. The company hadn’t explained the reason for the increase clearly.
The takeaway from the latest public outcry over drug prices is this: the old way of thinking no longer works. To navigate the rough waters ahead and address public sentiment around the way products are priced, we must both understand the environment and have a clear vision of what needs to change.
How Did We Get Here?
A well-read medical journal recently ran an editorial signed by 100 of the nation’s leading cancer doctors reminding us that the average American household lives on $52,000 a year. The oncologists pointed out that new cancer drugs approved by the FDA in 2014 were all priced at $120,000 a year or more.
Patients, they said, were skipping doses to manage the cost. People understand the critical importance of the drugs we make, but many say they are struggling to pay. Increased costs of living, lackluster growth in pay and competing demands for resources have made many sensitive to the price of basic goods, especially, medicines. Following the journal editorial, the oncologists launched a petition on Change.org asking the FDA to allow the import of medicines from Canada and enable Medicare to directly negotiate drug prices with manufacturers.
Patients are feeling the pinch in their pocketbooks. The Health Research and Educational Trust and Kaiser Foundation this week noted that the number of workers with deductibles has grown and the amount of those deductibles has increased 67% since 2010, about seven times the rise in workers’ wages.
Public frustration escalates with each news story on payers rationing treatment to desperately sick patients because the cure costs “$1,000 a pill” or top hospitals denying access to their formularies for some new cancer drugs because they don’t see the benefit relative to the cost.
Of course, news stories often fail to provide sufficient detail or offer relevant facts, such as explaining net prices, a concept little understood by the average patient.
These trends are likely the beginning of what’s to come. Rightly or wrongly -- patients, physicians and the press are beginning to see medicine as just another product or service subject to the same praise or criticism as anything else. As an industry we must do a much better job of defining and dimensionalizing value in terms that matter to the ultimate stakeholder: the patient.
With the health insurance crusade largely waged, drug pricing is the next offensive for some Washington policymakers waging war on healthcare costs. As data piles up, political players will be taking a closer look at driving down prices.
The Center for Economic and Policy Research, for example, suggests that the healthcare system could save $230-$541 billion over 10 years by allowing direct negotiations between Medicare and manufacturers. Savings like this will be increasingly hard for either party to ignore.
Value assessments from respected third party organizations such as the Institute for Clinical and Economic Review will continue to undercut manufacturers’ suggested pricing, often while manufacturers are in the midst of active access negotiations. Physicians and hospitals will continue to be emboldened in their scrutiny of new medicines bearing high prices, especially those for cancer and rare diseases. Value propositions will face robust questions.
Almost certainly, over time, we can expect to see intensified calls for pharmaceutical companies to disclose investment costs, growing pressure for unfettered Medicare negotiations and less support for patent protections.
The Path Forward
As the makers of drugs that improve lives, it is incumbent on the industry to demonstrate value in terms that resonate with those we serve. The costs of drug development - $2.6 billion according to the latest figures from the Tufts Center for the Study of Drug may matter to investors, but not to patients. Ask yourself, if you’re struggling to afford a cancer medicine for your child or parent, do you care about the company’s investment? The truly honest answer is probably “no.” Patients care about getting medicines that make them feel better (or save their lives) at a cost they can afford. Here are some ideas to consider:
• The value of a drug is very different from the value of other consumer goods. To address and correct public misperception of our therapies, which can be fueled by social media, we must radically embrace more consumer-focused communications. Our message must be rooted in the old saying that “value is in the eye of the beholder.” We must show the impact of medicines on peoples’ lives and take these messages directly to our stakeholders.
• Value also is a reflection of who we are and what we stand for – and has to be about more than just words. Nearly every company today describes itself as “patient centered,” but how do we demonstrate it? Without action, these broad labels are meaningless. But demonstrated in the real world, the notion of patient-centric can be differentiating.
• Patient assistance programs continue to be important, but they’re becoming the status quo and less useful to patients on high deductible plans. Companies need new, intensely human ways that show who we are and what patient support means today in the face of more specialty medicines and increased out-of-pocket costs to the patient.
• Numbers matter. The old model of safety + efficacy + price continues to play a central role in coverage conversations with systems, payers and PBMs. Yet, for many new therapies, well-designed health economics data, or innovative net pricing programs, will also play a central role.
Ultimately, the way we think about and communicate value must refocus on the things that matter to people, who likely don’t want to be patients. Companies must gently remind people about the possibilities created by modern medicines. The race to the moon and the race for cures for cancer, Alzheimer’s and Parkinsons have a lot in common: they are inspiring.
Should we shy away from defending prices by focusing on R&D investment? No. But any marketer who continues to use the cost of innovation to defend price must then be ready to disclose the dollars and resources invested - or the argument sounds empty. The days of unchallenged pricing are clearly drawing to a close. The Turing event this week and the focus on drug prices in an election year will only increase the urgency to better explain value by an industry that is making remarkable scientific breakthroughs that change patients’ lives every day.