The politics and PR of drug pricing, part 3

An ongoing series: Part 1 is here. Part 2 is here.

It’s hardly news, but people are outraged over drug prices these days. Moreover, prospects of price regulation has affected biopharmaceutical stock prices (Morning Consult, December 1, 2015).

Public outrage over higher and higher prices has reached a boiling point. Seventy-two percent of Americans believe drug costs are unreasonably high, according to a recent Kaiser Family Foundation poll.

This September, Democratic presidential frontrunner Hillary Clinton echoed the public’s sentiment with a drug pricing tweet that contributed to wiping away about $145 B in market capitalization from biopharma companies.

What may be news to many is that some new drug price-lowering regulations are already on the books (Morning Consult, December 1, 2015).

Despite pushback from several corners including manufacturers, patient advocates, providers and members of Congress, CMS finalized a proposal to group similar biologics together to determine a single ASP (average sales price) calculation.

This means that multiple biosimilars that use a common reference product will be reimbursed using a single ASP payment (versus multiple ASPs, which is what industry preferred). […]

Another example of a new legislative & regulatory environment involves a little-noticed provision in the November “debt ceiling” bill. Democratic Presidential candidate and Senator Bernie Sanders (D-VT) again put forward a bill that requires drug manufacturers to pay additional rebates if they raise prices at an annual rate higher than generic drug inflation. […] [T]he Sanders legislation was included in the October budget deal to address the debt limit and 2016 budget. The Bipartisan Budget Act of 2015 was signed by the President on November 2, 2015.

Though massive, new drug price control laws are unlikely, I’d expect more of this nibbling at the margins unless drug companies manage to get out of the limelight (Morning Consult, December 1, 2015).

[P]harmaceutical companies will have to be more cautious with price hikes and launch prices, knowing that there will be payer pushback as well as front page news stories vilifying “profit-hungry” companies.

Still, Americans seem to support more than tinkering (STAT, December 1, 2015).

About 7 out of 10 Americans, including two-thirds of Republicans, said Medicare, the federal health insurance program for older and disabled Americans, should be able to negotiate lower prices for all prescription drugs. Another 13 percent support negotiations for just high-cost drugs for illnesses such as hepatitis C or cancer.

All of this suggests that drug companies are a lot less robust to negative PR than we might have thought (Wired, December 1, 2015).

When Hillary Clinton jumped into the fray with a tweet declaring her intention to do something about drug pricing, the Nasdaq Biotechnology Index dropped 5.1 percent. […]

[W]e should think of them as “fragile little birds that the protective hand of government carefully shields from the harsh vagaries of truly free, competitive markets,” writes Uwe Reinhardt, professor of economics at Princeton.

Gilead, in particular, took a PR beating in a Senate hearing that exposed its process of price setting for hepatitis C drugs (Washington Post, December 1, 2015).

Company documents released by the investigators included a color-coded chart assessing potential reactions to various prices for Sovaldi and Harvoni. At $70,000 for a Sovaldi regimen, a letter from Congress was judged “likely.” At $90,000, a negative reaction from advocacy groups was deemed “very likely.”

“Let’s not fold to advocacy pressure in 2014,” Gilead executive Kevin Young wrote in an email cited in the report. “Let’s hold our position whatever competitors do or whatever the headlines.”

(More on this here.)


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