Drug Cost Outrage Reflects a Need for Better Value Communication

Panorama by on February 13th, 2015

It’s said that “beauty is in the eye of the beholder,” and the same may be true when it comes to value. Even as investors pour money into the pharma and biotech industries and seek to reap the rewards of the industry’s latest treatment advancements, the people who benefit from those very treatments believe that the industry may be overvaluing its worth. Criticism about high drug prices is nothing the industry hasn’t heard before, but the recent uproar over Sovaldi seemed to raise the discussion to another level.

Last month, at the J.P. Morgan Healthcare Conference & Biotech Showcase 2015, Michael Griffith, Executive Vice President, inVentiv Health and President of the company’s commercial division, led a panel discussion on defining value and what companies can do to improve their value proposition. (Click here to view a recording of the panel.)

Griffith started his career in the financial sector before spending nearly two decades in the biotech and pharmaceutical industry. Now as the head of inVentiv Health’s new Contract Commercial Organization (CCO), he hopes to help pharma rethink its methods of commercializing assets while enabling smaller companies to launch the drugs they invent without the backing of Big Pharma. The CCO delivers comprehensive drug commercialization services and strategies, including, sales teams and training, market access, non-personal promotion, branding, advertising, public relations, adherence and full management of the commercialization team.

Griffith spoke with PM360 about the current commercial challenges that both pharma and biotech face, how the industry can deal with the pricing criticism, what will happen when the biotech bubble bursts and why a new map app could have more commercial value than an antibiotic that clears all infections.

PM360: One of the challenges that pharma currently faces is criticism over prices. What can pharma do to address these criticisms from external parties who don’t really understand how these prices are set?

Michael Griffith: Pharma needs to focus on the value—and that is often not evident in the price. If patients, physicians and regulators understand how a drug can keep someone out of the hospital over five years, the implications on cost and quality of life become clearer. You begin to understand what you’re paying for, how it offsets other, and perhaps greater, costs and why it is worth every penny. Your view of some of the prices we’ve been hearing may change in a fundamental way.

The way in which people have reacted to pricing has implications for pharma that may lead to a shift in the way it describes new products. If you hear that treating hepatitis C previously cost $500 a year while the new drug costs $300,000 annually, it is easy to understand people who are saying, “Well, that’s crazy.” Then, this new pricing is extrapolated in the press to the global cost for covering all patients with hepatitis C. But suppose that from the start we understand that we need to more clearly and effectively communicate that this new drug is not intended to be a mass-marketed, high-volume product—it’s intended to treat very specific variants of the disease. In these cases it can have a miraculous impact. So these very specific patients, who have a very specific reaction, will view the value fundamentally differently.

I know in the case of Sovaldi, one of these hep C drugs, the company is trying to position the drug by saying, “Hey, even though this cost is big upfront, it’s really saving you a lot of money on the back-end since it’s actually a cure that eliminates the need for further hospitalization for this disease.” However, I don’t know if that message is completely getting through.

I don’t think it is. And I think underlying that is the idea that pharma has sort of lost that sense of “We’re here to help society before ourselves.” An ongoing tension exists between shareholder communication and patient communication. And while this may be really unpopular to say, it might also be that some of these drugs have been overpriced and that the criticism is accurate. They just made a mistake and were seeking too high a price. And in any other market, for instance the auto industry, people can put too high a price on a car. If they don’t sell many, they drop the price and it’s not considered hostile to their customer. So there are lots of different answers to that question, but it’s clear that the value for money argument isn’t being made effectively, for many reasons.

I think one of the reasons has to do with pharma’s reputation problem—people don’t really see them in the best light. So, if pharma is viewed negatively and people aren’t going to trust anything coming out of the industry, who can better deliver their messages and provide this point about value?

That’s a really good question. When drug companies are making headlines for issues raised by regulators, over a long period of time, the public’s confidence begins to erode. They wonder whether the industry really knows what it’s doing and people start to lose confidence.

In the end, “What are their intentions?,” becomes the bigger question. In other words, “What is the priority for pharma?” It’s very popular for everyone to say the patient is first—and most people really believe that. But maybe that’s not always evident in pharma’s behaviors or the missteps are magnified because people are looking for mistakes.

So how do they handle this kind of negative press? What advice would you give a pharma company that is having a similar issue to Sovaldi?

It’s a case-by-case situation. You look for all of the good things that a company has done and re-emphasize them. You must be honest about the mistakes you’ve made. For instance, when you ship something that was adulterated or when you have lost a license because you didn’t keep a clean enough facility—or even when you have sought a price that maybe wasn’t sustainable—you have to own up to that and think about that when you respond to the criticism. It’s important that you have a balanced view of your own image.

The most important thing is to really think differently about how you communicate. The first word that somebody gets about your pricing should not be when it’s published by the formulary. Your pricing should be well vetted for a long time before it hits a formulary and before a headline appears. Talk to physicians, pharmacists, payers and governments. Have those conversations in an organized, thoughtful way well in advance of the time that your price hits the news. By engaging all of the agencies and entities considered opinion leaders and putting the information in front of them in a thoughtful way that they can understand, you get ahead of it and will get a much better result.

Besides the pricing issue, do you see any other big commercial challenges in 2015 for pharma?

Right now the money flowing into the industry is extraordinary for investors, and as a result a huge amount of activity is taking place. I’ve been through a number of these cycles. What happens when these cycles turn, though, is that all of a sudden lots of programs get abandoned, and people who have a certain amount of money must choose what to invest it in. For example, they might have three programs running, and they must pick one and abandon two in order to focus on the third. Then they’re out trying to license those other two. Ultimately, these downturns usually lead to layoffs in research and development.

During these cycles, my cautionary advice is, “Don’t run too hard.” Don’t get too far out over your skis during these times. But the tendency is to want to pile as many molecules in the wheelbarrow as you can. However, if I was talking to a CEO right now I would say, “Just be careful.”

You said something similar in that panel. You talked about biotech as a bubble that you expect to burst at some point. Can you explain the reasoning behind that and what that’s going to mean for the industry?

I think it’s a natural ebb and flow. Money comes in from a lot of different directions, and these include everyone from high net worth people who care about a disease because it touches them personally to the government and agencies like the NIH. It comes from the universities, venture capitalists and so on. And money is flowing in because so many big wins were achieved in the last three years. Investors experienced many good outcomes. So when you look at the world of investment opportunities, this one’s looking pretty good.

And, as I have done this both on Wall Street and also as a service provider for more than 30 years, I’ve seen these periods of time when the money starts to flow particularly freely. I personally think we’re in one of those times right now. A lot of people disagree with me. Some think that genetics-driven discovery is exploding and as a result, more effective ideas need to be pursued that can fundamentally change human health, and that can also reach parts of the world not currently reached. And hey, you know what, that’s what makes the conversation interesting. Evidence exists on both sides. Both points of view contain truth.

You also asked your panel, “Who is going to emerge as victorious in the aftermath of the burst?” One person simply said, “The person that gets out in time.” In your view, how does a company come out of this as a winner if a burst does occur?

From what I have seen in the other cycles, when the bubbles burst, the little guys get picked over by well-capitalized Big Pharma and Big Pharma wins. Maybe that’s the way it’s supposed to be. People criticize the large pharma companies because they’re not particularly innovative. It’s commonly published that only 20% of new products are actually invented by the Big Pharma companies who launch them and 80% of inventions come from other places. Maybe being the well-capitalized secure channel is the best way to play, so you just play these cycles and wait them out. Big Pharma just buys each other out during the rises. Then, when it bursts, they pick through the litter of the little guys and stock up on promising new things.

Speaking of promising new things. One area that the pharma industry is starting to invest in is the tech world. There are new opportunities like 3D printing, sensor technology, wearables and artificial intelligence. From your perspective, which of these opportunities might be best for pharma and what’s a good approach when pharma does look to invest in these kinds of opportunities?

All of those technologies have applications to pharma. I see lots of 3D printing technology applications, for instance, in pharma and devices. But one of the more interesting things said during the panel addressed the difference between industries. They discussed the fact that biotech billionaires do not exist, at least not at the rate that Internet and software billionaires do.

There is some truth to that. It’s sort of interesting, but I think the reason for this is that these companies are selling into a vast unregulated consumer market. They potentially have eight billion customers and each of those customers can buy two items. So the size of the market they sell into is vast and unregulated, whereas pharma must have a doctor write a prescription. So the idea that the pharma inventor should somehow get the rewards of somebody who makes something that can be sold to billions is missing that point. Both the regulator and pharma’s ability to get physicians to write a prescription for their product very strictly limit the revenue opportunity.

After the panel, however, someone asked, “Well, why doesn’t society value human health more?” I can’t answer that question. If you can find an antibiotic that clears all infections, it should be pretty valuable—but it might be that designing a new map app is actually more valuable.

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