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Everything is too expensive: Part 2
February 2020
by Peter T. Kissinger  |  Email the author
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Pharma was offended by my December column and they boosted prices as a 2020 New Year’s resolution. It is difficult to precisely know what they did because the public can’t yet see how such announcements percolate through to patients. Will the new cash support innovative R&D, cover manufacturing cost increases, support advertising, improve the dividend, or be the means to announce deeper discounts or rebates to selected channels? That will vary company to company and drug to drug. Average price increases have no meaning for patients. Impeach averages for their tyranny.
 
Pricing is a variable. We in business want to maximize the sales from top payers while making incremental profit at the low end. That’s fair. Wine is a popular drug with pricing that varies with where you buy it and when. Airlines and hotels do the same—optimize the mix, fill capacity. Volume matters, and some states are exploring their own negotiations with manufacturers. In the generics area, one can imagine several companies competing for supply contracts for different medications, with one of them winning and others losing. That’s OK. With proprietary drugs, it’s tougher, but we should do a better job of thinking about comparative advantage relative to price. Given that results for many clinical trials are never published, how can we fairly evaluate safety and efficacy?
 
A presidential candidate promises to lower drug prices on the first day in office. Others now suggest the FDA is less rigorous with approvals than before. There is such a thing as being between a rock and a hard place, a “mission impossible” assignment. (Perhaps Tom Cruise is available.) The market sets prices. Too high and sales head to zero; too low and we can’t cover production costs and shortages result.
 
In response to the December column, several astute readers noted that I’d failed to mention that pharma is “raking in billions in profit” from research sponsored by the government, for example, at universities. Whoa! That’s wildly out of context. Academic research is high-risk stuff for the most part, and employees of biopharma are paying for it like the rest of us. It is done principally to educate students who start as amateurs in the lab and emerge as professionals. The chance of an outcome quickly translatable to patients is extremely low. The basic biology of disease is unraveled when we are lucky and is then shared globally for all who can use it.
 
We can’t discover more than a “potential drug” or “potential drug target.” It will not be a drug until the FDA says so, often 10 to 20 years later. These days, the next step is often to put the academic therapeutic concept into a startup or small biopharma with no sales at all. They will operate at a total loss on the project for a very long time. Most of these firms will also fail. Some will progress a bit and entice established pharma to fund the work further (typically for an early clinical phase), pursue a license agreement, or buy the company outright. There is no formula, no process works consistently. Those who think that academics develop new drugs are reading too many university press releases.
 
A very nice read on a translational project that brought together academics, other nonprofits, government agencies and pharmaceutical companies was published online in STAT on Jan. 7, titled “Against all odds: The inside story of how scientists across three continents produced an Ebola vaccine” by Helen Branswell. Twists, turns and never-give-up stubbornness over decades is not atypical. That’s what it often takes. Merck jumped in because they could and saw the need to serve. Public-private partnerships are becoming more common, especially with respect to orphan diseases and those most prevalent in developing economies. Resilience in the face of the negative cash flow from R&D is stressful. Today a lot of the discovery risk is outsourced, and the validation of safety and efficacy is as well. We need the BIG(!) pharma infrastructure to manage the many of hundreds of millions required. Academics can only take tiny risks, reload and repeat. They don’t lose a thing, not even a dissertation chapter. All research projects provide a result, rarely a therapy.
 
Another reaction to the December column related to healthcare being a right. I disagree. It is certainly desirable, but health is also a responsibility and a matter of luck. Your luck is improved when you consider “better living through less chemistry and more exercise” (paraphrasing an old DuPont tagline). Also consider the dogma that some 50 percent of prescriptions are never filled. Those that are filled are too often picked up by patients who are then not adherent to their doctor’s recommendations. Docs used to give “orders.” Today they are our paid consultants. To intelligently accept our consultant’s wisdom, we need to read product inserts and study the results of clinical trials, at least for the most critical diseases. Most in our community suggest that only we, not the patients, can appreciate what’s going on. That’s arrogant and unfair. We should no longer expect to thrive on a mix of hype and obscurity. Boeing again comes to mind. Cutting corners and keeping secrets needs to go away.
 
The meaning of “ethical pharmaceutical company” may need to be updated. There is a lot of stress in the system. We now know more. The patients should know more too and adjust their expectations. Medicine is a team sport, dramatically different from before Y2K and with very little in common from the 1950s and 60s. The decade now ended was enormously productive in delivering results for patients. We’ll do even better in this one. Please remember that there are no drugs that are “safe and effective” in every patient or in any patient at any dose.

Peter T. Kissinger (who can be reached at kissinger@ddn-news.com) is a professor emeritus at Purdue University, founder of BASi, chairman of Phlebotics and director of both Prosolia and Tymora.

To read the first “Everything is too expensive” column from the December 2019 issue, go to http://ddn-news.com/index.php?newsarticle=13833

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