Springtime for Pharma?

April 26, 2016

Even though pharma's “dark days” are fading away, the chill of the last few months will not soon be forgotten, writes Tom Norton.

With April Fools’ Day behind us, I guess we can actually take in that first deep breath of spring -- and reflect on what the past winter brought us. Not to put too fine a point on it, but for U.S. Pharma, even though the “dark days” are fading away, the chill of the last few months will not soon be forgotten…

Let’s review where several key industry issues stand this spring after a winter season that can only be described as “difficult”…And more importantly, where these matters may be headed as we move into the summer of 2016.

Washington DC

Let’s begin in the nation’s capital with the upcoming April 27th hearing of the Senate Special Committee on Aging. Scheduled to appear is the former CEO of Valeant Pharmaceuticals, Michael Pearson, who will be asked questions about the “aggressive pricing practices of Valeant pharmaceuticals” that were instituted during Mr. Pearson’s tenure as CEO. This hearing is sure to be an above average Capitol Hill “circus” for both the national media, as well as the political class that continues on the hunt for US Rx manufacturers.

At best, we can only hope this latest episode of “Get the Drug Industry” goes better for Pearson than it did for his other Rx colleague, Martin Shkreli, formerly CEO of Turing Pharmaceuticals. During that unfortunate session, you may recall, Mr. Shkreli concluded his contentious Hill appearance by stating that the congressmen who had just questioned him were “imbeciles”.

Regardless of what happens when Mr. Pearson appears, the thematic that Washington, D.C. has clearly established over this past year is, “Something must be done about the high prices of drugs in America”-and no doubt we will hear it again on April 27th.

The Presidential Campaigns

Coupling this congressional state-of-mind with the ongoing tenor of the presidential campaigns, you do have to step back and ask yourself: When was the last time that both national parties made the public crucifixion of the American drug industry a top priority in a presidential campaign? Simple answer:  Never

Nonetheless, we are currently being treated to almost daily denunciations and now, direct threats, against the U.S. Pharma industry. Both Democrat candidates, Hillary Clinton and Bernie Sanders have kept up a steady drum beat of criticism, and not to be outdone, Republican leader, Donald Trump, has repeatedly shocked the US Rx world with his statements on drug pricing. His latest is a plan for the U.S. to allow lower cost foreign drug imports to be brought into the United States, which pairs nicely with his earlier call for direct manufacturer negotiations with Medicare to lower the cost of prescription drugs.

 At this point, you’d certainly be correct in believing that the election of either a Democrat…or a Republican next fall could result in some big challenges for the American Rx industry.

California and Ohio Propositions to Control the Price of Drugs

Spring has also brought interesting developments on the issue of drug price controls to the states of California and Ohio.

California

You may recall that several months ago, I stated that California would likely end up being “ground zero” on the question of drug price controls in the U.S. this year. Why? Because a California proposition which calls for the creation of the California Drug Price Relief Act has been certified and is currently set to be voted on by the citizens of California on November 8, 2016.

What is the essence of this proposal? Any prescription drug purchased by the State of California shall be obtained at the same “fixed price” rate that is accorded to the U.S. Veterans Administration. And what does this mean? That drug manufacturers that wish to do business with the State of California would need to offer discounts to the state in the range of 42% to 25% of average wholesale price in order to sell their Rx’s.

What is the status of this measure right now? It’s moving towards a November 8th vote just as the sponsors, The AIDS Healthcare Foundation hoped it would.

In the meantime, it’s turning out to be a dicey spring in Sacramento for the U.S. Pharmaceutical industry. Clearly realizing what is potentially at stake this November, drug firms across the country are pouring millions of dollars into California to stop the AHF concept. Known as the “Californians Against the Misleading Drug Measure”, as of March 2nd, over $54 million had been raised to stop the proposition  with expectations that the totals could go much higher before the campaign goes into full swing after Labor Day.

Ohio

In Ohio a similar proposition effort tied to VA pricing has been circulated. However, it faces a much more complex course before it actually goes before the voters of Ohio next November.

On February 4th, the Secretary of State certified the measure, and it was sent to the Ohio legislature for final consideration. From the date of official receipt, the Ohio legislature has four months to review the proposition. That would mean by June 4th the legislature would have to either approve or disapprove of the measure.

However, the industry association, PhRMA, and others have filed legal action against the “Ohioans for Fair Drug Prices” alleging that several questionable actions were taken during the collection of the names of citizens who support the concept.

As of March 2nd, the Ohio Supreme Court indicated it was requesting briefs from both PhRMA and the “Ohioans for Fair Drug Prices” on this matter and directed The Aids Healthcare Foundation, which is also running the Ohio effort, to respond in 21 days. As of this writing, there is no word on further rulings by the Ohio Supreme Court’s on this issue.

So…

· Should the Court invalidate the collection of the signatures, presumably the Secretary of State would then decertify the inclusion of the proposition on the ballot for November 8th.

· Or on the other hand, if the Court rejects this challenge, it would once again fall on the Ohio legislature to complete its review on deadline which falls on or about June 4th.

Under Ohio law, by June 4th, if the legislature has formally accepted the proposition, a November vote on this issue will occur. If the legislature rejects the proposition, the “Ohioans for Fair Drug Prices” have until July 6th to gather an additional 91,000 signatures to override the legislature’s opposition.

Certainly not much time to execute such a large effort, which does make the success of the Ohio proposition appear to be much more uncertain than California’s.

That said, if either the Ohio or California propositions is adopted, it would be disruptive to the pricing of drugs not only in the States of Ohio and California, but also across the nation as well.

Pharmaceutical Research and Manufacturers Association of America (PhRMA)

Finally, in the midst of all these spring developments, where is the industry’s association, PhRMA, on all of this?

It’s important to understand that PhRMA has a brand new leader. His name is Stephen J. Ubl, and as of last November he was named PhRMA’s CEO. He joined PhRMA after a 16 year hitch with AdvaMed, the implements and device association, during which time he led a successful, if temporary, rescission of the Obamacare tax on medical implements. No small matter this, and no doubt the primary reason why PhRMA retained his services.

His reputation around Washington, D.C. is that of a “cool operator”, and two recent articles on Ubl lend some support for that theory.

The first, by veteran New York Times healthcare reporter, Robert Pear, stated that Ubl obviously faces a firestorm of drug pricing issues and industry criticism as he takes the helm of PhRMA-but that he could be the right man for the job:

“If anyone can find areas of agreement with critics, or at least work productively with them, it may be Mr. Ubl.”

Another article, published in the Morning Consult, again referencing Ubl’s calm demeanor, titled its piece, “StephenUbl Isn’t Blinking” and quotes his view on PhRMA’s situation this spring as:

                  “We have this incredible opportunity in front of us to make a significant impact on public health,

                  and on people’s lives, if we can address the debilitating and costly cause of these diseases.”

Although not exactly a cutting edge statement by a PhRMA CEO, it is interesting that in both articles Ubl calls for “constructive conversations” with traditional PhRMA adversaries like America’s Health Insurance Plans (AHIP).  Said Ubl:

“Conversations are at an initial level, but there is common ground that can be found.”

That’s different…

So in the midst of all this springtime angst over the pricing of American pharmaceuticals, is it fair to state that perhaps PhRMA’s new leadership really is looking for some different approaches to address the industry’s current abysmal situation? And that perhaps, just maybe, this spring holds some hope for a resolution of this ongoing American Rx drama? 

If Ubl and his PhRMA colleagues actually do begin to move the needle on these matters, it doesn’t take much rumination to appreciate that more than a few American pharmaceutical executives will collectively begin drawing deep breathes of fresh, spring air…in hopes of better times ahead.

Tom Norton

NHD Smart Communications of Illinois, Inc.