Drug Pricing Goes Political

File under: Global Pharma Marketing, Healthcare Business, Healthcare innovation

It was a cold February 2010. The winter of Obamacare. There was active opposition from Republicans, the Democrats had lost a pivotal Senate seat in Massachusetts after the death of Edward Kennedy, and there was increasing ambivalence by the general public around President Obama’s healthcare proposal.

Even within the administration itself, people were saying, “Let’s move on, let’s move on, healthcare reform is dead, dead DEAD.”

Then, WellPoint happened.
In early February, WellPoint’s subsidiary Anthem Blue Cross Blue Shield announced it was raising insurance premiums on individual policies in California and Indiana by 39%, with price increases expected in nine other states as well.

There was a firestorm of reactions. Health and Human Services Secretary Kathleen Sebelius wrote a letter to the president of Anthem voicing serious concerns about the increases. Wellpoint’s CEO Angela Braly was forced to testify before Congress.

And suddenly, healthcare reform was back on the front burner. WellPoint couldn’t have chosen a worse time to raise its prices. If it had waited even six more months, it’s very possible that healthcare reform would have faded away for lack of interest and urgency.

But instead, WellPoint handed Obama a public relations coup. Very quickly, WellPoint became exhibit A in the court of public opinion arguing that the health insurance industry was unfairly profiteering.

It was a watershed moment. A WellPoint Moment.

Overnight, media outlets, editorial boards, social media, and politicians were demanding health insurance reform. Republicans were back on their heels. Democrats were able to seize the moral high ground and they passed the reform bill on March 21, 2010 which was then signed into law by the President late that night.

Barely a month after it seemed like healthcare reform was dead, WellPoint’s move on pricing became the political catalyst for historic changes that are still being felt today.

Drug PricingIs this pharma’s WellPoint Moment?
Last year there was an uproar over Gilead’s pricing on Sovaldi for Hepatitis C. Economic pushback from insurance companies and PBMs along with new competitive alternatives, however, forced Gilead to negotiate discounts. The issue slipped off the front page.

Then the young and brash Martin Shkreli, CEO of Turing Pharmaceutical, jacked up the price of a generic drug by over 5,000%. Shkreli couldn’t have chosen a worse time.

Election cycle candidates, both Republicans and Democrats, began calling for price reforms and/or pricing limits. Reporters began looking at other recent drug price increases. Valeant was served two federal subpoenas related to its pricing.

For those in pharma who may have hoped this issue would fade away like last time, their hopes were in vain. It was a hot topic in the recent primary debates, and Hillary Clinton has recently called on the FDA to accelerate approval of generic competitors and asked the FTC to investigate what she called “anti-competitive price gouging.”

This may be a WellPoint Moment for pharma.

How should pharma respond?
The PR consultants in DC may very well be counseling caution. Conventional wisdom suggests that pharma CEOs have more to lose by entering the public square on this topic. The industry association PhRMA issued a press release to respond to Clinton, but that hardly registers as vigorous engagement.

People want to know if the actions of Turing are examples of boorish behavior from a bad boy on the fringe, or are they symptoms of a larger systemic problem of how we price, regulate and legislate healthcare products and services?

If you google “drug price” you’ll find “gouging” as the first auto-fill by the Google search engine. Search for “pharma CEO response…” and you find pages of lurid titles about the Turing CEO.

There is a time for pharma CEOs to engage in a broader and deeper public debate and that time is now.

Two-Pronged Approach
My sense is that this needs to be a two-pronged approach.

On the one hand there is the need for education on the business model of pharma, the costs of R&D, the oversize impact of drugs on reducing healthcare costs through reduced hospitalization.

And on the other hand, there needs to be a commitment to industry self-policing of pricing that is truly egregious and not in the best interests of patients. Since we are a free-market economy I’m not suggesting price-fixing, but there is a role for serious peer pressure among pharma leadership.

What we need are pharma CEOs who are prepared to take to the Sunday morning news shows, absorb the body blows from the media, and provide a clear and steady narrative about the social contract that underlies our healthcare system in the United States and the important role pharma plays.

There will undoubtedly be compromise and movement as a result of a vigorous debate, but that’s ok. There is already a passionate public dialog about drug pricing underway, but the problem is that it’s one-sided. Until pharma enters the conversation, the debate will be dominated by political statements uttered in the heat of an election cycle.

And that sounds like a possible WellPoint Moment.

Pharma can do better.