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“Take a Breath” on the Specialty Drug Pricing Issue…?


Watching the latest volleys fly in the ongoing specialty drug pricing wars, Tom Norton wonders: Is it possible that all involved couldn’t just step back and take a breath?

Watching the latest volleys fly in the ongoing specialty drug pricing wars, it does make you wonder: Is it possible that all involved couldn’t just step back for a moment and take a breath? There’s got to be a better way to create pharma pricing policy than the current one that’s filled with acrimony and nasty political-like charges…even as patients clamor for access to these Specialty Drug therapies.   How did all this unpleasantness get started, anyway?   The trip point was December 6, 2013 when Gilead announced the approval and marketing of its highly effective Hep C product, Sovaldi. Aside from the remarkable therapeutic profile the drug carried, the price that Gilead placed on a course of therapy was shocking:  $84,000 per patient. This retail price was so “off-the-charts” that I recall more than a few industry colleagues stating, “That price will kill the drug.”   That view, however, quickly vanished as Gilead reported Sovaldi’s Q1 2014 sales performance at $2.5 billion. Stunning, to say the least.   With that announcement, the official the ‘war of words’ was launched, not only on Sovaldi’s pricing, but also on the pricing of all other so-called specialty drugs.   PBMs fire the first shots Who fired the first shots? Clearly, it was the U.S. pharmaceutical benefit management industry. In particular, the PBM, Express Scripts, utilized political-like rhetoric that strongly criticized Gilead:   

“The irrational pricing of drugs - and what has essentially become a tax on Americans to defray the cost of treatment for the rest of the world - has ginned up anger like I have never seen. Patient groups are protesting, and payers of all kinds - small businesses, large businesses, health plans, Medicaid plans, unions and government agencies - are galvanized to do something about it.” Steven Miller, Chief Medical Officer, Express Scripts, June 17, 2014.

Frankly, I can’t recall any other attacks - directed at the Rx industry by a private source - as sharp as these were.  

The Insurance companies weigh in

Soon after the PBMs launched, the insurance industry fired off its own shots. In tone, they were more restrained, but nonetheless clearly unhappy.

Here’s an example

of what America’s Health Insurance Plans said:

“The calls for sustainable pricing are growing louder. A sustainable pricing solution will require all private sector stakeholders working together, and health plans will continue to fight for affordability on behalf of American consumers.”  AHIP, October 10, 2014.

The insurers’ position essentially represented the view of their clients, both public Medicaid programs and private companies. Their patients wanted access to Sovaldi, but the insurers didn’t want the product’s pricing to destroy limited Medicaid or private company drug budgets. Clearly, in Sovaldi’s case, those fears were warranted.   Generally, the insurance company response to Sovaldi was dramatic. They soon loaded down the product with tough prior authorizations. They also instituted fairly drastic step therapies designed to force patients to use older, less expensive drugs before obtaining access to the innovator specialty drug.   Certainly these strategies made short-term sense and who could blame them? No health insurance company wants to be crushed under the weight of “over utilized, high priced Rx services”.  

PhRMA & Gilead reply

Not surprisingly, the folks at the Pharmaceutical Research and Manufacturers of America quickly waded in with their


to the PBM & insurer charges:

“For the first time, 150 million people (worldwide) who are chronically infected with hepatitis C can be treated and cured of this terrible disease. Their lives, in short, will be transformed. The value to these patients, and to their loved ones and society - you can't put a price tag on it.” John Castellani, President, PhRMA, April 10, 2014.

PhRMA’s “price tag” comment rings true on several points. The Specialty Drugs, and really, all Rx drugs come to market with substantial R&D costs. Many times those costs are enormous, and many times the actual years of patent life left on the new Rx when they reach the market is very short. The result? High retail Rx costs that are passed onto to patients.   PhRMA also put the powerful “cure” word on the pricing policy table. Rarely has that ever happened.   Gilead’s


, however, took on a slightly different shading:

“While Sovaldi greatly enhances the standard of care for hepatitis C, it was priced such that the total regimen cost is equal to that of prior standard of care regimens. Sovaldi reduces total treatment costs for HCV – taking into account the cost of medications (including those for side effects or complications) and healthcare visits – and it represents a finite cure, an important point to consider when comparing the price of a pill or bottle to the lifetime costs of treating a chronic disease.”  
Cara Miller, Gilead spokesperson, May 20, 2014.

While also presenting the amazing “cure” concept, Gilead also rationalized it’s pricing in terms of the “cost effectiveness argument.” Essentially, they suggested, a product like Sovaldi can potentially drive enormous reductions in overall healthcare costs. In the case of this Specialty Drug, it is a substantial, very strong defense for its pricing decisions.  

“Take a Breath” on specialty drug pricing?

So, looking over the various colliding points of view in this case of Specialty Drug pricing, can we expect that “taking a breath” will occur here? Let’s consider the realities of such a reasonable course of action:  

The patients’ role

First, for American Hep C patients, the demand for access to Sovaldi will not abate. In 2014,

117,000 Hep C patients

out of more than

3.2 million Americans

who have the disease got the drug. So literally millions of additional American patients will continue to seek the Rx. This is not to mention the estimated

150 million

that want the drug, worldwide. To improve access, will Hep C patients be willing to pay more copay or coinsurance costs to obtain Sovaldi and the other Specialty Drugs? I’d say, no. Quite unlikely.  

Gilead’s role

And what about Gilead’s position? Let’s be plain. The one thing that Gilead could do to lower the heat on this issue would be to voluntarily reduce the current pricing on Sovaldi. Is that going to happen? Well, yes, but not “voluntarily”. It’s happening because the market is forcing Gilead to reduce the price.  Ever since Abbvie’s Hep C product, Viekira, arrived in December, 2014, and Express Scripts, which controls the Rx lives of

50 million Americans

, decided to

cut off reimbursement

for Sovaldi, Gilead has moved aggressively to lower Sovaldi’s price to several other PBMs.   So is market competition the only way the pricing will decrease for Sovaldi, and really, the price of all the future Specialty Drugs? Yes. No Specialty Drug producer is ever going to lower its price because it is, “the right thing to do.” Their shareholders won’t let them. Most are publicly owned and all seek a profit every quarter. A quick look at the performance of these Specialty Drug stocks this past year, and I think you will appreciate what I am suggesting.  

Rx cost effectiveness argument

And what about the “cure” point that PhRMA and Gilead are making, one that no PBM or insurance company has countered? Is it true that Sovaldi may actually be an incredible healthcare cost savings mechanism?     It could be, but determining that will take time. And to be fair, by the time solid cost effectiveness results are available, Sovaldi’s pricing issues will likely be history due to increased market competition.  

Insurers’ role

So, what about the insurers’ role in all of this? What can they do, indirectly and directly, to control the costs for the Specialty Drugs? Well, within their pharmacy programs, they could double down on older ideas like institutional drug compliance programs, while mandating appropriate generic drug & mail order pharmacy dispensing where appropriate.   They could also make another push at reducing expensive medical errors that still run very high every year.   The insurers could rethink and loosen their prior authorization policies to not only control “over utilization”, but also provide effective, lower cost Rx options for patients.   And finally, they could institute reasonable, responsible patient drug copays and coinsurance programs to help control “over utilization”, while also causing patients to be better health consumers.   All these actions that could reduce their drug line costs, but will the insurers make many of these modifications to help their patients access Specialty Drugs?  Not likely.  

PBM’s role

In the case of the PBM’s, they could create more public transparency on the issue of

“spread pricing”

which potentially would bring clarity to both the insurers and the patients on the pricing of Specialty Drugs.   And PBMs could also drop the overly aggressive attack on Gilead and really, all Rx companies. Cooling this behavior would improve the atmosphere for possible solutions.   So, will the PBM’s take these steps to calm the waters and explain their pricing of specialty drugs? Doubt it.  

Take a breath?

So, for anyone who thinks the players involved in this specialty drug pricing confrontation will actually “take a breath” and voluntarily work towards better access and lower prices, I am sorry. You’re not being realistic.   Here’s the truth: As long as we have a free enterprise medical system that encourages all healthcare entities to price at “what the market will bear”, there will be no “taking of a breath” on the specialty drug pricing issue.   Instead, the vibrant ‘war of words’ on specialty drug pricing will go on, and patients will continue to have a hard time affording these important, new products.  

Tom Norton, NHD Smart Communications of Illinois, Inc.        


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