When did “profit” become a six-letter obscenity?

Anyone who’s been watching the Democratic primary debates knows that two of the three front-running candidates routinely equate Pharma executives with 19th century robber barons. It’s almost laughable when we see Bernie Sanders, having just suffered a heart attack, energetically resume his assault on the industry that saved his life. It’s just as absurd as we witness Elizabeth Warren insist that healthcare “costs” will go down, while refusing to acknowledge the enormous tax consequences of Medicare-for-all.

In the end, however, vowing to replace the Affordable Care Act with socialized medicine must be a losing political strategy. Contrary to the assertions of Senators Sanders and Warren, many people in the U.S. are quite comfortable with their health insurance, which allows them the freedom to shop around, tailoring both coverage and costs in ways best suited to their situations. When Bernie characterizes his plan as “no premiums, no co-pays, no deductibles,” voters are surely adding “and no choice.” A recent poll conducted by the Kaiser Family Foundation poll revealed that Medicare-for-all support sagged from a high of 59% in March 2019 to 51% in October 2019. This erosion will doubtlessly continue as the costs and consequences are debated during the primaries.

What does this mean for Pharma? In the long term, it may be good news. Writing in the Wall Street Journal (September 24, 2019), Peter Loftus suggested that as healthcare debate rages on, any substantial congressional action in 2020 will be highly unlikely. Loftus also noted that an assortment of bills are being considered in this session of Congress. If enacted, they could reduce Medicare spending by up to 30% and seriously impact our industry’s financial health. The impending legislation includes the following:

• Allowing Medicare to directly negotiate prices for drugs without a generic competitor
• Basing Medicare payments on prices paid elsewhere in the world
• Requiring manufacturers to rebate Medicare for price increases above the rate of inflation

These proposed rules are designed more to score political points than they are to effect comprehensive reform. For one thing, they ignore the role of payers and insurers in demanding huge price discounts while inflating prices. For another, they fail to take into account the economic value that most new drugs produce due to their improved clinical benefits. (Remember the uproar around the “thousand-dollar pill” Sovaldi? Once payers calculated the benefit of curing hepatitis C, the price became a bargain.) Giving Medicare bureaucrats the absolute power to refuse to pay for drugs, no matter how beneficial, would have a chilling effect on drug research and development.

At the heart of these proposals is a single obsession with price. Our politicians have obviously never heard the ancient marketing adage: “Speed, quality, price – you can have any two but not all three.” We’re already seeing the consequence of the national price fixation on the availability and quality of generic drugs. Earlier this year, Teva announced that it could no longer afford to make vincristine, a foundation drug of many chemotherapy regimens, including childhood cancer. In recent months, thousands of patients who had been controlling their blood pressure with generic valsartan (aka Diovan) were suddenly switched to another medication. Why? Not because of a clinical issue – but because some overseas manufacturers were making the drug with carcinogenic additives.

Whatever the outcome of the coming election, we shouldn’t address the drug price issue with ad hoc, piecemeal approaches. Pharma industry leaders are now lobbying Congress to adopt sensible, balanced proposals that address all market segments fairly, including insurers, payers, and providers. Pharma must do its part by making its voice heard.