Hepatitis C is expensive to treat, which is why a lot of patients don’t get treated for it, and that possibly contributes to why it’s the deadliest infectious disease in the US. It’s gotten to the point where states are considering legal challenges to those precious patent laws that pharma typically spends a lot of money on to make sure no one touches. So, in the fight to increase Hep C treatment, in one corner we have legal challenges, and in the other we have good ol’ market forces. Abbvie’s new Mavyret costs well less than half the amount of some existing treatments, and it can treat all six strains of the infection. Your move competition, may the markets be ever in your favor.
Have you ever looked at the online sex offender registry for your neighborhood? Not reassuring, right? Well, it looks like the state of California may soon have a similar system for drug makers. On Governor Jerry Brown’s desk is a law that would require drug manufacturers to give the state notice of price increases so that these can be posted on the internet. Even the slightest of cynics would wonder if this is being done simply to increase public (and media) pressure on a drug company that might otherwise be tempted to act like a total Shkreli. While this seems like a slam dunk for a left-leaning state like California, recall the ballot initiative that failed last November that would have capped the cost of certain drugs at the price paid by the US Department of Veterans Affairs. Strange days.
You gotta love the pharma industry. For a bunch of smart people, we are pretty dumb sometimes. All it takes is one study published on drug development costs and suddenly everybody’s up-in-arms. The study, released in JAMA (The Journal of the American Medical Association) attempts to debunk the widely held notion that it costs ~$2B to bring a drug to market–at least that is how the media is picking up the story. The study says it more like $750M, a big difference. Know what else makes a big difference? Your sample, that’s what. In this most recent assessment the authors looked at 10 small companies that had successfully commercialized a cancer product. Knock knock. Who’s there? Bias, that’s who. Let’s count the ways: (1) only selected 10 companies, (2) only selected cancer compounds, (3) only selected small companies, and (4) only selected companies that won the drug development lottery and successfully brought a cancer drug to market. According to BIO, 95% of cancer drugs fail to make it to market. Where are those R&D costs included? Thought so.
Just to be clear, we have no idea what it costs to bring a drug to market, and to some degree we do care what the number is, but only a little. The point is, don’t publish a clearly biased study. What we won’t discuss is that the article goes on to state how profitable those companies were/are. Super. The same day the study was released, Dr. Scott Gottlieb (FDA Commissioner) spoke at the RAPS 2017 Regulatory Convergence Conference and said “There’s been criticism of the various estimates of how much it costs to develop a new drug. But we know some drug programs can easily top $1 billion, just in direct outlays.” Correct.
The industry and the public may not want to go crazy over drug development costs or pharma profits or drug pricing or CEO pay, because it all comes down to innovation. We probably want our best and brightest looking for new treatments, right? If so, then the reward has to be big enough to make up for the risk of failure. Like it or not, a lot of the innovation (we don’t know exactly how much) in the pharma industry is coming from smaller companies like the ones analyzed in the JAMA article. Again, it comes back to economics; risk, reward, supply, and demand. It’s why you don’t see hundreds of new automobile companies starting (and failing) each year, because single-digit returns on capital aren’t worth the risk of failure.
To sum this up, InsightCity asks; Why does R&D expense have to be linked to drug prices or to corporate profitability? We don’t care what it costs Ford to design, make, and market a car, we just know that it costs about $35,000. Buy it or not. Until the healthcare market says “no,” treatment costs will rise – that’s the consequence for living in a free market. Deal with it. Again, we don’t support high drug development costs, but drug development is the ultimate game of portfolio theory. As the great Ebby Calvin “Nuke” LaLoosh said “sometimes you win, sometimes you lose, and sometimes it rains.”
Generic company profits are eroding and, according to an article in Bloomberg, this can be traced to the upstart of family-owned drug manufacturing facilities in India. While “family-owned manufacturing facilities in India” might raise both eyebrows for people in drug markets around the globe, India’s Union Health Ministry has proposed new quality checks on its drug manufacturers. The increase in generics competition has caused downward pressure on prices, giving fits to giants like Teva, Mylan, and Sun—all of whom are feeling the squeeze. The editors at InsightCity are pleased the low-cost regions aren’t driving down our earnings. Maybe our $0 (USD) in revenue explains their lack of interest. Nah, they just couldn’t compete.
Last week, Merck CEO Kenneth Frazier was among the first of many business leaders who left the White House’s American Manufacturing Council. The manufacturing heads cited President Trump’s comments following the protests and violence in Charlottesville, VA as the reason for their departure… and it snowballed from there with more CEOs resigning until Trump just dissolved it. Frazier’s presence on the council demonstrated the importance of drug manufacturing to the larger US manufacturing economy, and some lauded him for generating Positive Pharma Press™ by giving up his seat at that table. What’s Frazier up to next? Well according to the president, “Now that Ken Frazier of Merck Pharma has resigned from President’s Manufacturing Council, he will have more time to LOWER RIPOFF DRUG PRICES!” Ouch, Mr. President.
U.S. President Trump has drafted an executive order on the topic of drug prices. The pharma industry is probably pleasantly surprised and pharma critics are probably confused and angry. What? They don’t agree? Crazy, right? According to the NY Times, the administration looks to be taking an indirect route to lowering drug costs by easing regulations on the drug industry with the expectation that lower costs to drug makers will translate to lower drug costs. In other words, all that “getting away with murder” stuff has softened considerably, at least as it relates to this executive order. InsightCity is taking a bold wait-and-see approach as to whether this is the end of Trump’s pharma crack-down. “Crack-down” doesn’t feel like quite the right word, does it?
The formula for rising healthcare costs in the US is filled with a bunch of pointed fingers lately. One finger is being pointed at drug maker Kaléo (no, not that Kaleo) by pharmacy benefit manager Express Scripts. They’re suing Kaléo over its price hikes on a heroin/painkiller overdose treatment. According to Express Scripts, these hikes triggered price protection rebates owed to Express Scripts, which total around $14 million—most of the lawsuit. The PBM has successfully sued larger drug companies like Horizon, so Kaléo may be at a bit of a disadvantage here. Especially since Express Scripts could use the extra cash to deal with the fingers pointed at it, including one $15B lawsuit by its (soon-to-be former) largest customer, the insurance provider Anthem.