Will 2015 Be The Year Of Drug Pricing Transparency?

By Anna Rose Welch, Editorial & Community Director, Advancing RNA

Growing up as a violinist, I always dreaded one question: “Will you play at my wedding?” Even more daunting was the question that would follow: “What’s your rate?” My teacher always told me not to undersell myself: “They’re really paying for 20+ years of weekly lessons and countless hours of practice, in addition to their wedding day.” But it’s often hard for clients to look beyond the price tag.

Lately, the pharma industry has been facing a large amount of resistance to its own price tags. In the past year, we’ve been greeted by headlines about drugs launching with $90-, $100-, and even $140,000-per-patient treatment regimens.  But we’ve also been greeted with reports about the high cost of development—a $2.6 billion endeavor, Tufts Center for the Study of Drug Development reported last fall; the think-tank continues to defend this number despite speculations from many that the report, funded in part by drug manufacturers, is a ploy to defend high prices. (Tufts has yet to release the detailed methodology about how it got those numbers.)

But Tufts’ report got quite a bit of attention, and rightfully so, if the industry is truly serious about becoming more transparent. Lately, I’ve heard a lot of chatter in the clinical space about data transparency, and it seems that 2015 will be the year of discussion— and hopefully some action — about establishing drug pricing transparency.

According to a recent Wall Street Journal blog, there’s a bill in the works in California that would require drug makers to reveal all the costs that went into a drug, including the drug’s R&D costs, R&D grants, clinical trial and manufacturing costs, any necessary acquisition fees (patent/licensing fees), and any financial assistance provided to patients. This push for transparency, according to San Francisco assemblyman, David Chiu, has come after years of hearing that drug prices go hand-in-hand with a drug’s development costs. However, there hasn’t been any “transparency about the cost between R&D and the prices charged. If your costs are related to your prices, provide the information to help us understand that,” Chiu said in a statement.

There’s also some indication that pharma is growing increasingly receptive to allowing the FDA to consider price when reviewing a drug application, which would lend itself to more price transparency. According to an article in Fortune, a new survey by PricewaterhouseCoopers shows that nearly half, or 43 percent, of the pharma execs surveyed were in favor of having cost evaluated along with a drug’s clinical performance —a big increase from 2010 when only 14 percent favored this process.

However, this move could potentially have some negative effects on R&D. An article in TIME says making cost a deciding factor for FDA approval could lead companies to focus on drugs that aren’t targeting serious but more expensive conditions, such as cancer, in order to increase the likelihood of an approval.

I have some hesitation about this argument, given the fact that companies have concerns about their patent expirations. While drugs that are cheaper to develop might be “easier” to approve under this potential new FDA process, they would certainly not be a viable financial replacement for expired blockbusters, and playing it safe would most likely result in smaller revenues and smaller pipelines. I also can’t imagine an industry as competitive as pharma would ever turn away from the allure of innovation. (Look at this week as an example — Bristol-Myers Squibb’s Opdivo beat out Merck’s Keytruda in the non-small cell lung cancer (NSCLC) race, even though Keytruda looked like it was going to come out the NSCLC winner earlier this year.)

Regardless of the effects of the different proposals to boost pricing transparency, I think engaging in the discussions will be a step in the right direction toward a more patient-centric industry. Pharma has been doing a valiant job taking the value-based approach when defending the increasing prices — PhRMA President John Castellani’s statement to CNN in July is a good example of this. But it’s also important to look at it the way the public would.

I certainly recognize the difficulty many in the public have accepting the prices of the medicines on the market, especially when the public is met with stories such as this one from Quartz: “The Best Selling Prescription Drugs In The World Last Year.” Topping the list was Humira, which garnered $12.5 billion; followed by Sovaldi ($10.3B); Remicade ($9.2B); Rituxan ($8.7B); Enbrel ($8.6B); and Lantus ($7.3B). The list goes on, with Celebrex rounding out the bottom at $2.7 billion. Although at the bottom of the list, $2 billion is no meager sum — especially for the general public. Providing more information on what exactly went into that final price tag could help give some perspective into what the billions in sales end up supporting.