Bioregnum, Pricing

As a prominent analyst predicts (eventual) drug price controls, biopharma braces for a blow while Trump balls his fist

Sometime this week, no one is sure when, President Donald Trump is expected to give his long-awaited speech on drug pricing. And a long lineup of key players in the field has been scratching their heads, anxiously trying to determine just how far the nation’s most unpredictable president could go.

Trump, of course, has been free with his populist brand of anti-industry rhetoric for more than a year now, after establishing the baseline with repeated assertions that pharma companies have been getting away with murder for years. 

But there’s been little direct action, beyond the work at the FDA to hustle up new generic approvals while trying to use the public spotlight to whip up some fresh competition for the price gougers. 

FDA commission Scott Gottlieb likely tipped the administration’s hand on one point in a preview he offered on pricing last week, indicating that industry practices in fighting a delaying action against generics and biosimilars will face some direct challenges. But while significant, that by itself won’t bend any longterm trends on pricing in favor of payers.

Meanwhile, public anger over drug pricing is repeatedly stoked with an unending series of high profile assaults on certain players that have used their pricing power to jack up revenue from old drugs.

Just last night, Mallinckrodt was back in the spotlight with Acthar, which has gone from $40 a vial in 2001 to $40,000, threatening the basic police and fire services provided by the town of Rockford, IL.

Former Rockford Mayor Larry Morrissey set the stage for a 60 Minutes segment with this quote: “‘Why is healthcare so expensive? Because the fix is in. That’s the answer. That’s the short answer.”

And it’s not the kind of answer biopharma wants to hear right now, especially on 60 Minutes.

The industry is still disgruntled over the administration’s decision to get pharma to cover part of the donut hole in Medicare drug prices. But they can live with that. There’s been a steady focus at PhRMA on trying to shift the focus from the manufacturers to the insurers and PBMs that manage the benefit. But it hasn’t worked. And recently that tactic has produced some painfully awkward sallies on social media that tends to attract as much spontaneous laughter as discussion.

With public anger percolating at an unprecedented rate — a majority told Kaiser Health that reducing drug pricing should be a top priority of policy makers — some analysts believe that whatever Trump comes up with it won’t be enough to stop the one strategy that would make the biopharma industry reel: Price controls.

Senior Wells Fargo analyst David Maris put it in blunt terms a few days ago.

We believe the US is on a longer-term arc toward price controls and lower margins, as there is an uprising that has been percolating for years against high drug prices. While the causes are many and the problem much more complicated and nuanced than many others would lead readers to believe, there is a rebellion at hand. Arguments about the cost to develop a drug or how other supply chain constituents are to blame are not appreciated by the parent standing at a pharmacy counter abandoning their child’s prescription because they cannot afford it due to an outrageous deducible or high co-pay. And examples of unconscionable drug price increases have further hardened many consumer opinions. 

That day probably won’t arrive this week. But if that’s the path we’re on, Trump is faced with either satisfying the anger with some grand compromises, or stoking it by pulling his punches.


Image: President Donald Trump at a speech in October, 2017. AP IMAGES


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Director, Financial Planning and Analysis
Molecular Templates Austin, TX
Manufacturing Associate – Downstream
Molecular Templates Austin, TX
Senior Statistician
Koneksa Health New York, NY

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