Greed is misunderstood? Tackling biopharma's pricing image problem
On February 12, 2014, dozens of protesters marched in New York City to voice their outrage over the exorbitant cost of Gilead's hepatitis C treatment Sovaldi, which had won FDA approval just several months prior. Infamous as the "$1000 pill," Sovaldi's (and its older brother Harvoni's) price has been slammed as a concentrated dose of biopharma greed, and a glimpse into the dark heart of a multi-billion dollar sector that places profits over patients.
It won't come as a shock to our readers that the industry has a different take on the matter. An $84,000 treatment regimen is, after all, still far cheaper (not to mention less invasive) than a liver transplant necessitated by the downstream consequences of an HCV infection. In fact, given the sheer scope of research, money, and grinding effort that goes into the drug discovery, clinical trial, and drug development processes, many feel that companies like Gilead place a fair market value on their labor and its fruits.
But making that case to payers—and to an even greater extent, patients and the general public—is a formidable task. And it's one that pharma has bungled in recent years amid the proliferation of specialty meds whose novel therapeutic mechanisms and benefits are matched in scope only by their price tags.
So what can biopharma do to convince payers and patients of their products' value? And has the ground fundamentally shifted beneath the industry's feet when it comes to pricing?
A conversation with inVentiv Health EVP Michael Griffith
Value (and over-valuation) in biopharma was one of the main topics of conversation during the JP Morgan Healthcare Conference and the Biotech Showcase 2015 in San Francisco earlier this month. The very first lunch plenary session of BTS15 centered on value (and over-valuation) in pharma, featuring panelists such as Merck SVP Iain Dukes and Melinda Richter, head of Johnson & Johnson's JLABS.
After the panel, BioPharma Dive sat down for an exclusive interview with the event's moderator, Michael Griffith, who is the EVP of inVentiv Health, a global CRO and CCO (Contract Commercial Organization) giant headquartered in Burlington, MA.
inVentiv Health's structure is, in itself, a sign of the shifting landscape that pharmaceuticals and biotechs face today. Its "CCO" model represents a recognition of the fact that companies have to start thinking about things like cost and marketing at a much earlier stage than they used to, and that firms trying to get a drug through all facets of a supply chain might benefit from consulting services that can address stratified needs.
It doesn't hurt that inVentiv has a leading CRO, meaning that the company can tackle everything from preclinical research to marketing and beyond. "You tell [a company], I have all the capabilities required to launch a drug or a device or an idea, and they instantly get it," said Griffith. "[T]hat's important because the science informs the commercialization... And increasingly, the commercialization mindset and view is informing the clinic."
In essence, Griffith says, the very endpoints of drug development have changed. "[I]nstead of your endpoint being some of the old traditional endpoints, like direct comparator or head to heads, you've got to start looking for endpoints that give you the ability to be successful in the market," he said.
"It used to be people believed, well, if it's a better product, I'll sell it. That's not necessarily true anymore. You have to both be a better product and you have to prove it in a way that causes to people to want to switch, and causes a physician to want to switch. So when you're selling to very risk-averse group of buyers, you better have a very compelling case for why they should buy your product and not something that's already there."
The payers are finally flexing their muscles
Making that "compelling case" increasingly boils down to a tug-of-war between proving therapeutic value and making a pitch for affordability. No case study better highlights that reality than the ongoing marketing saga between AbbVie's and Gilead's next-gen hepatitis C medications.
Like many in the industry, Griffith believes that Express Scripts' decision to favor AbbVie's therapies over Gilead's in exchange for a discount heralds a paradigm shift in pharma pricing—albeit one whose seeds were sown years ago.
"We've gone through a period of almost ten years now where the payers, the buyers, have been disorganized and on the run," said Griffith. "And one thing [the Affordable Care Act] did was it shifted the power of the payer to a new group of entities. And they're starting to flex their muscle."
That flexing includes the sort of arm-twisting that Express Scripts has already deployed in hepatitis C and plans to impose on everything from PCSK9 cholesterol drugs to PD-1 inhibiting cancer meds. But as Griffith notes, this isn't just an American phenomenon.
"It's playing out in the UK, it's playing out in Germany, where you have national health systems doing the exact same thing," he said. "The formularies are ejecting big drugs... and they're saying we're just not going to pay for it anymore, you're not on the list anymore."
Unsurprisingly, pharma companies aren't exactly thrilled with this emerging dynamic. "You have people suing because there isn't recourse, there is no panel for appealing these decisions, so I have big national health systems deciding not to reimburse or carry my product anymore, and I don't have a place to go to challenge that other than to go to courts," said Griffith. "It's a global frustration with the price of drugs."
Crafting a convincing counterfactual
Industry professionals face some frustrations of their own, including the overwhelming challenge of convincing payers, the press, and the public that groundbreaking new medications are only possible if they earn enough money to continue R&D and clinical efforts, and that game-changers like Sovaldi/Harvoni actually bring everyone's medical costs down in the long run by curing an ailment and eliminating the need for future, more expensive medical procedures.
"It's like the rearview mirror thing?" said Griffith, laughing. "There's a little bit of that in our inability to effectively communicate to people what the value is. If I keep you out of the hospital for three years and that's worth a million dollars, then there is a value paradigm that isn't necessarily evident in the press when they say, hey, but it costs $300,000 each!"
This is the classic case of the counterfactual dilemma, which plagues fiscal debates in nearly every policy arena, but particularly in healthcare. The trouble is that it's difficult to advance a counterfactual value proposition without coming across as condescending or disingenuous—or brushing up against regulatory boundaries.
"If it requires you to sit down and absorb a lot of information, very few people have the energy or even the access to the information, in a well-presented way, to really understand it," said Griffith. "But here's where regulation gets tricky."
How do you pitch value while complying with hazy regulations?
Promoting a product to doctors and patients in a way that both conveys full value while remaining within the confines of the law is, to put it lightly, easier said than done. For instance, the path to taking a pitch directly to patients, whether through social media or some other form, is riddled with regulatory potholes (not to mention a couple of land mines).
"[T]here's certain things I can and can't do with regard to directly reaching out to patients," explained Griffith. "And there is an opaque, new, emerging set of rules that are being promulgated by regulators about what you can say to consumers. And those of us who are in the business of communicating with consumers and patients and doctors and pharmacists find it difficult to necessarily know exactly what's onside and what's offside."
That's a real problem since, according to Griffith, pharma really does "now understand that they have to do a better job of educating the public about the value" of powerful and effective drugs. "I'll have some clients who are very comfortable using certain strategies, and then I'll have a whole bunch of clients who wouldn't touch them... So at the same time they want to reach out and have a crisper, cleaner message about value, there's a lot of new regulation which is causing them to think, well, we can't really say anything."
21st Century Cures: Our only hope?
It's still far too early in the process to tell—but there's a chance that the industry may actually get some solid, well-defined guidance on this very confusion over marketing and outreach this year. Earlier this week, the U.S. House Energy and Commerce Committee released a draft proposal of an ambitious plan to overhaul and modernize the FDA.
The bill, under the 21st Century Cures initiative, is far-reaching (you can read BioPharma Dive's guide to the proposal here). But one provision actually takes a stab at addressing social media guidance, promising that the committee will explore ways to eliminate FDA "uncertainty" over digital marketing and craft proposals meant to "clarify and rationalize" outdated rules on how the biopharma industry and physicians can communicate information about therapeutic products to patients and the public.
It may seem a little bit like Lucy yanking the football yet again to industry watchers, especially considering that there's no guarantee the legislation will actually pass (and plenty of uncertainty as to what its actual contents will be by the end of the legislative process). But as more exciting drugs that empirically improve outcomes make their way to market, figuring out how to have these conversations with patients and payers will increasingly become a make-or-break imperative for biopharma.