Politics. PharMA lost yet another major member last week, AZN.
Trade groups offer cushy sinecures where consensus rules, no one is required to think much that boat rocking is verboten. It is hard to imagine, then that TEVA, ABBV and AZN were expelled. Instead, it is most likely they saw little value for their multi-million-dollar annual membership fee.
The drug business has been a symbol of American leadership in biotechnology innovation that could serve the world. It also excused the flight of manufacturing overseas with a promise of good jobs. Unlike making silicon wafers or long-life batteries, biotechnology research is relatively clean.
All those things have and mostly continue to be true but increasingly the pharmaceutical industry has become more of a global enterprise than an American one.
The opacity of the health care system has meant that the only prices anyone could put their finger on were mythical launch numbers. Worse, U.S. patients – or their insurer – paid higher prices than pharma’s overseas customers.
An opportunity emerged for political figures banking on nationalism and populism for their appeal. What we got after a five-year debate was the Inflation Reduction Act.
Having failed to stop PhaRMA’s raison d’etre – price controls – the price of membership is now too high.
Policy. The declining influence of PhaRMA on American politics has been accompanied by the creeping realization that the industry increasingly relies on solving problems that do not exist.
Last week’s adcomm vote in favor of PFE’s maternal vaccine for RSV looks a little nutty to even the casual observer. The committee raised important questions about safety and a related vote had more than the normal (read: zero) objections.
Pregnant women are frequently asked to eliminate alcohol, tobacco use and bad food. I know a mother of four that wouldn’t drink Diet Coke when she was pregnant.
Yet, advisers to the leading drug regulator in the world ultimately decided it is A-OK to inoculate pregnant women against an infection that kills no more than 500 infants a year – most of them living in poverty and with poor access to health care.
It is hard to square that circle unless you consider that the industry is now chasing revenue any way it can. Their primary regulator, the Food and Drug Administration, is more than willing to help, apparently.
Power. When President Barack Obama was pushing what eventually became the Affordable Care Act, then PhaRMA CEO, Billy Tauzin convinced the president to exclude the drug industry from new regulations. For the American health care industry that decision, more than any other, has proven disastrous.
President Obama’s policy decision left the pharmaceutical industry with comparably less regulation of price and utilization. Rent seeking comes naturally in the health care industry and into the gaps created by pharma’s politically protected status combined with its obsession for opaqueness has crept nonprofit hospitals, health insurance companies, Group Purchasing Organization and Pharmacy Benefit Mangers.
List prices began to separate from net prices after rebates, fees and something known as direct and indirect remuneration were redirected to all the market participants on which the drug business relies to write and approve scripts.
To offset some of these practices, drug companies use formulary placement and rebates to protect, even in a monopolistic way, certain products. The Federal Trade Commission has taken notice and made these practices its justification for intervening in AMGN’s acquisition of SGEN.
The industry’s options, its flexibility to perform, get narrower. There is a lot of market cap and dividend at risk in a changing political and world order.
(Tune in Wednesday when I will be discussing this and other macro trends in health care.)
Have a great rest of your weekend.
Emily Evans
Managing Director – Health Policy
Twitter
LinkedIn
