Managing the 3 Fronts of the Drug Pricing Conundrum: Policy, Creativity, Collaboration

12 September 2019

Thomas Unger / Pharmaceutical Executive

Advances in genomics are leading to pharma’s rapid generation of precise targeted therapies. These and other advances demand an equally timely adaption among key stakeholders, including policymakers, payers, providers, patients, and others across the healthcare ecosystem. If policymakers and other stakeholders fail to meet the call of new capabilities and the increasing rate of change, the science will lose all impact, and worse yet, patients will be unable to access potentially life-changing medicines. 

Consider that the battle being waged on cancer has moved to a new front; curing more patients is within reach. In fact, an analysis by ADL forecasts that the new generation of drugs has the potential to improve cancer survivability by 18% in the US. This success comes with a hefty price tag: approximately $195 billion, or two times current cost-of-care estimates.

The higher cost of curative therapies should not come as a surprise, and it will not simply be limited to new cancer therapies. In recent months, Novartis announced the pending launch of Zolgensma. The drug is a curative treatment for pediatric patients less than two years of age with spinal muscular atrophy (SMA) and is intended to be priced at $2.1 million. Similarly, Bluebird Bio announced that Zynteglo, its new drug to treat beta thalassemia, will carry a price tag of $1.8 million. 

The aforementioned will be the most expensive therapies ever, but they are not outliers. In a high-level analysis of data, we found that about 5% of drugs currently under clinical evaluation are potentially curative. While significant attrition is expected, the large number of potentially curative treatments currently in Phase I indicates the potential for a significant increase in the number of these treatments entering the market over the next 10 years. 

While the costs of these therapies are significant, we must remember that these are curativetreatments. They carry much greater long-term value and cost savings, but will likely come with significantly greater upfront costs compared to the traditional chronically administered drugs and necessary medical treatments over the course of a patient’s life. 

The impacts of disruptive curative therapies and advances in the future of health will be profound. For healthcare systems under continuous cost pressure, changes must be adopted to respond and realize expected benefits. To be best positioned for success, three key areas should be addressed:

o  New collaborations between self-insured employers, payers, accountable care organizations (ACOs), and grocery chains could help optimize diets tailored to disease states and treatments. While genetics ultimately give insight to an underlying cause of a disease, variation in human phenotypes have a significant impact on patient response to treatment. Many medications and medical treatments are more effective when coupled with dietary and activity changes—considerations that may become even more relevant to a higher value threshold of higher cost therapies.  

o  Collaboration between stakeholders that can devise incentives and other mechanisms that reward improved patient adherence is another area ripe for innovation. Concepts designed on behalf of patients might be more effective if engineered with or by patients themselves. Further, much like precision medicines, collaborations would devise a variety of frameworks that accommodate unique behavioral characteristics of patients rather than provide a single universal construct. 

o  Collaboration between patient advocacy groups, pharma, and payers can lead to greater investment in systemic ways of collecting more meaningful data. Traditionally, patient advocacy groups have been left to their own devices for understanding disease and the disease journey. Collaborations with pharma and health companies could help improve insights as they understand how to transition to products or treatment recommendations quickly. Holistic collaborations may help advocate meaningful tax incentives or “vouchers” that could provide companies with incentives for earlier investments.

The future of health is no longer a far-off aspiration, it is here now. Advancements across the healthcare spectrum are taking place before our eyes, and the opportunity to cure previously untreatable diseases is within reach. As Novartis CEO Nas Narasimhan, said in recent commentary on CNBC, “[W]e need new economic models to determine exactly how much value [a cure] represents.” Economic models and new financial frameworks are one significant piece of the proverbial puzzle, but the burden of finding solutions does not only fall to payers, providers, and policymakers. The entire industry and its stakeholders all have equally important roles to play—and it begins with having the audacity to rethink business, operating, and collaboration models. 




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