Drug Pricing – What’s the Answer to High Cost Off-Patent Medicines?

September 13, 2016 Jim Combs


In the wake of the Turing, Valeant, and Mylan EpiPen pricing controversies, YourEncore Insights coordinated a conversation with two top experts to discuss potential solutions to some drug pricing dilemmas.  I interviewed Peter J. Pitts, former FDA Associate Commissioner and President of the Center for Medicine in the Public Interest, and Dr. Tim Franson, YourEncore’s Chief Medical Officer and former VP of Global Regulatory Affairs for Eli Lilly and Company.

The transcript is provided below: 

Combs:  In the U.S. there is a lot of news and attention being brought to Mylan recently with their EpiPen pricing, which has increased 500% to 600% in the last eight years according to sources.  Many are calling for price control, including politicians, but Peter Pitts, what say you? 

Pitts:  The right answer is to drive competition.  Competition is what lowers prices.  And in the U.S. when it comes to generic drugs and devices, it lowers prices quite significantly.  When you have a product like EpiPen that has been off patent for a while but has no generic competition for a number of reasons, the company is free to price the product however they see fit.  So I think it’s an opportunity for the FDA to put senior resources against applications, like Teva’s, that introduce competition to Mylan’s EpiPen, while ensuring they’re brought to market safely and effectively and lower cost.  At the end of the day, minus competition you’re not going to really have any on prices, whether it’s generic or on-patent competition within the same therapeutic category.

Combs:  Is there anything specifically FDA could do to help foster competition, particularly as it relates to high quality generics?

Pitts:  Yes. Last March, Rob Califf, the FDA commissioner, said the agency was going to prioritize generic applications for products that don’t currently have generic competition, from two to three years to six months.  That’s something the FDA said a couple of months ago, and the Mylan thing happened subsequent, so I would hope the FDA is beginning, with its new GDUFA funding, to really get serious about that.  But, you can’t just push the button and have things change; these things are a process.  It’s also important for people to understand that when products don’t come to the market as quickly as they’d like, or if they don’t come to the market at all, it’s not necessarily the FDA’s fault.  There are lots of things that go on that aren’t seen by the public, because some information is confidential, proprietary to the company.  If the company wants to share it, that would be permitted, and I think they probably should answer some questions.  But at the end of the day, the best thing the FDA can do is really work with companies to help them solve problems and get these products to the market as quickly as they can.

Combs: To your point around FDA involvement, with any organization there are resource constraints, and the FDA is no different.  There’s always more needs than there are people, so where does high-quality generics fit into the broader to-do list of the FDA? 

Pitts:  High-quality generics is very high on the list of things the FDA wants to do, needs to do, and in fact is doing.  And this is especially true for first-to-market generics because not only is it an issue of price competition and access, it’s also an issue of avoiding drug shortages.  When you only have one manufacturer for a product, if that manufacturer has manufacturing issues, drug shortages can occur and that’s a public health crisis as well as a pricing crisis, which is really what everybody wants to talk about.  All of these things places high-quality generics and certainly first-to-market generics, very high up on the list of FDA’s priorities.

Combs:  And I think I’ll bring Tim into this conversation as well.  Tim obviously has a lot of experience in industry as well.  I suspect that in your career some products in your portfolios faced some price scrutiny, just as probably every pharma company has.  What’s your perspective on drug pricing and the public response?

Franson:  Well, that’s an interesting question, Jim.  I like Peter’s responses, and I do think that when these issues like with Mylan or Turing come up, they’re clearly not mainstream.  They’re not representative of what general pricing issues are.  But they raise some interesting discussions about pricing as a surrogate for trust and transparency.  And certainly although pricing has been quite in play in the political environment, on the transparency piece I guess I’ve never understood why industry has not taken a much higher profile approach to the value of their benefit over risk for certain products.  In other words, the last big pricing brouhaha we saw in the press several years ago was with the new hepatitis C compounds.  And on the face they look excessive in price, but if you looked at the overall value, you were talking about transitioning patients from multiple courses of interferon or other long term treatments to something that over six months would cure them, an absolute cure.  Now, what is the value of that?  And how can one avoid minimizing that value by focusing only on price?  So I think there are some very important examples we can work with to help us re-achieve price-value balance.  And to me, the balance comes back to very objectively assessing benefit and risk for patients.

Pitts:   That’s exactly right.  It comes down to getting the right medicine to the right patient at the right time.  The hepatitis C situation is a great example, because now people are being cured twice as regularly with half the amount of treatment, and the value to the U.S. healthcare system is going to be enormous.  It’s going to far outweigh the short-term cost, and that’s what many analyses have shown.  Of course, the initial out-of-the box reaction was, “Oh my gosh, these drugs are so expensive.”  But to Tim’s point, we need to talk about the value in the long term rather than the price in the short term.

Combs:  And so, Peter, there are a lot of calls right now for price controls, but what is the problem with controls?  Why not go that direction?

Pitts:  Price control would make the problem worse.  Price controls stifle innovation.  And without innovation you don’t get new products.  And without new products you don’t have competition.  I think that’s the last thing that we want.  It’s a very facile, soundbite, political solution, unfortunately in the political season to say price controls.  But that’s what happens when companies have a strategy of raising prices to increase their profits and also to allow insurance companies to demand a larger discount.  It’s an ecosystem of pricing and value.  Right now people are only focusing on the pharmaceutical industry, but to Tim’s point, whether you’re looking at Mylan or you’re looking at Turing Pharmaceuticals, these are not innovator companies.  These are generic companies.  And generic drugs in the U.S. are cheaper, are less expensive than the same generic product in Canada or Europe.  People forget that.  And when they think about the price of drugs, they also generally mean their copay at point of dispensation at the pharmacy.  And that is something that is not necessarily a pharmaceutical issue; it’s as much an insurance issue as anything else.  It’s easy to say “price controls,” it resonates and people like to hear it, it creates a bad guy that you can aim at, but it would only make the problem worse and also stifles innovation which would be the ultimate sacrifice.

Combs:  Peter, you supervised the FDA’s Office of Public Affairs and have some background in external relations.  What would be your counsel to companies that are considering a price increase?  There are many justifiable reasons for raising pricing in any industry, but is every pharma company going to face the same kind of scrutiny?  Are there any lessons learned or any guidance you would give to not just Mylan but also the broader industry as they think about their pricing going forward?

Pitts:  That’s about a five-hour conversation.  But I think the quick answer is:  Pay attention to what you’re saying, and certainly in a political season.  When Heather Bresch, the president of Mylan, says “Hey, I’ve got a business to run,” that’s not going to calm people’s anger. It’s only going to fan the flames.  People don’t understand the pharmaceutical business. That’s not their responsibility.  But it is the responsibility of the pharmaceutical industry to prioritize being in the public health business rather than being in the profit-making company business.  They’re both important and they’re both legitimate, but I think the pharmaceutical industry needs to stand up and become the poster child for responsible players in healthcare as opposed to being painted as the profiteering bad guys.

Combs:  Excellent.  Well with that, I think we can wrap up here.  But before we do, any kind of parting thoughts, Tim, that you’d like us to end on?

Franson:  I’ll just offer one.  And that is reflecting back on when I started in the field of medicine over three decades ago, I’m trying to imagine if innovation was stifled then by price controls what a different world we’d be in.  We wouldn’t be looking at the way we treat ulcer disease now with pills instead of major surgery.  We would not see all the innovations with devices, robotic surgery.  And I think we should be very cautious when we talk about price controls and the potential chilling effect on innovations of any of those kind of measures.  We’ve done pretty well as a society in terms of improving health and survival via policy support for innovations, and let’s focus on those successes and how we got there.

Combs:  Excellent.  And I’ll ask the same question to you, Peter, before we wrap up.  Anything you’d like to close with?

Pitts:  Amen to that.  We’ve got to protect sustainable innovation.  We’ve got to insert competition into the marketplace any number of different ways, and the FDA plays an important role in that, and transparency is a key part to understanding how the whole system works.

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