NEWS

By Bronwyn Mixter

Sept. 12 — Critics of drug prices are ignoring the long-term benefits pharmaceuticals bring to the health-care system, representatives from two drug firms said Sept. 12.

Gregg H. Alton, executive vice president at Gilead Sciences Inc., said, “we need to create a health system that can invest in short-term interventions that have long-term benefits.” Gilead has come under fire for the pricing of its hepatitis C drugs Sovaldi, Harvoni and most recently Epclusa. Epclusa costs $74,760 for a 12-week course of treatment.

Joshua Ofman, senior vice president of global value and access and policy at Amgen Inc., said “making decisions based on our short-term budgetary lens can lead to poor outcomes.”

The drug company representatives made their point at a forum of the American Enterprise Institute on the prices of specialty drug, which treat complex, chronic health conditions such as hepatitis C and cancer. This comes as drugmakers are under heavy scrutiny by lawmakers, consumers, medical professionals and presidential candidates on their pricing practices. Most recently, generic drugmaker Mylan Inc. came under attack for increasing the cost of its EpiPen 400 percent in nine years.

Hepatitis C Drugs

Alton said his company spent a lot of time doing market research when it set the prices for its hepatitis C drugs. Instead of setting the price based on unit cost, “we looked at what it cost to cure the disease,” he said.

Alton said the new hepatitis C drugs have 95 percent cure rates and are very tolerable.

“Value-based frameworks are important and have to be done correctly, but they don't necessarily solve the problem,” Alton said. “We need to look at incentives for innovation” as part of a value-based framework.

“The real challenge is the financing and how we budget for health care,” Alton said.

Amgen's Ofman said “it will make our health-care system unsustainable if we don't have innovation” and “biopharmaceuticals are one of the only solutions.”

Ofman said “there is no single answer to the question of value,” and “value changes over time.” He said “we have to maintain a scientific dialogue” and keep working to understand value.

Gilead is based in Foster City, Calif., and Amgen is based in Thousand Oaks, Calif.

Brand companies have been working to change the debate over drug prices. The Biotechnology Innovation Organization recently launched an ad campaign to defend drugmakers that have been under fire for their pricing practices (14 PLIR 1232, 9/9/16). The campaign, called “ Innovation Saves,” says new drugs can save both lives and costs to the health-care system.

Determining a Fair Price

Peter B. Bach, director of Memorial Sloan Kettering's Center for Health Policy and Outcomes, said “the fastest rising bucket of [health-care] spending has been prescription drugs.”

Bach said that “value-based pricing is a viable solution.”

Bach created the DrugAbacus, which is a draft tool that could be used to determine appropriate prices for cancer drugs based on what experts tend to list as possible components of a drug's value.

“The idea is to take multiple attributes of a drug and put them into a calculator” to determine price, Bach said.

Steven Pearson, president of the Institute for Clinical and Economic Review, said “we are all going to be continuing to wrestle with the factor that there is no one way to determine a fair price” for a drug.

Pearson said the long-term value of a drug should be recognized in its pricing, as well as affordability for patients.

Tomas J. Philipson, a professor of health economics at the University of Chicago, said “patients go bankrupt for these treatments” and “that's an enormous demonstration of value.”

“There are very few products you'd be willing to go bankrupt for,” Philipson said. “If you have value-based pricing for all of health care, my prediction is that we would be spending a lot more on” prescription drugs.

In October 2015, a group of top U.S. cancer hospitals started giving patients guidance about the cost of drugs used in their treatment (13 PLIR 1496, 10/16/15). The information supplements summaries the group has provided for 20 years on the effectiveness, side effects and evidence backing the therapies. Drugs are ranked on a scale of 1 to 5 for affordability, in the same way the group ranks other aspects of a therapy, such as toxicity or how effective it was in clinical trials.

Discounts vs. Rebates

Scott Gottlieb, a resident fellow at the American Enterprise Institute, said drug rebates are causing higher drug prices. He said rebates don't flow to consumers evenly.

The rebate system was a response to litigation in the 1990s accusing drug manufacturers of colluding when they gave drug discounts unevenly, Gottlieb said. In response, drug manufacturers moved away from discounts to rebates.

Gottlieb said drug manufacturers push up the list price of their drugs to fund the rebates, which typically go to pharmacy benefit managers.

Gottlieb suggested that Congress could legislate to allow drug manufacturers to offer different discounts to different entities. “The market would be more competitive if there were discounts negotiated up front” rather than rebates determined later, Gottlieb said.

To contact the reporter on this story: Bronwyn Mixter in Washington at bmixter@bna.com

To contact the editor responsible for this story: Brian Broderick at bbroderick@bna.com

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