The pharmaceutical industry does not get much love. Americans consistently rank it near the bottom of U.S. business sectors, often below law firms and airlines.
The job of explaining the value of drug research and manufacturing falls to an outfit called, appropriately, the Pharmaceutical Research and Manufacturers of America (known as PhRMA for short), a group of the nation's major drugmakers, based in Washington, D.C.
The president and CEO is Stephen Ubl, who joined in 2015 after more than 10 years leading a similar organization representing medical-device makers. Ubl was in Indianapolis this week, visiting Eli Lilly and Co., and he agreed to answer a few questions about the industry’s image, small companies like Valeant Pharmaceuticals that have sharpy jacked up drug prices, and why there are so many drug commercials on TV. The interview was edited for clarity and space.
Q: Donald Trump said in January the pharmaceutical industry was “getting away with murder” over the high price of drugs. Was he right?
A: I don’t think so. If you think about drug spending in 2012 and 2013, it actually was the lowest growing category of all health care expenditures. So we were a leading indicator, a force for restraining overall cost growth.
And there was a spike in prescription drug spending in 2014 and 2015, due to what I would argue were a number of anomalous factors. You had a record number of products approved by the FDA; I think there were 45 approvals in 2014. Medicaid was expanded as part of the Affordable Care Act. Fewer than the historic norm of products lost patent exclusivity. There was a cure for hepatitis-C that was introduced which was a revolutionary treatment breakthrough.
But what’s happening now is we’re sort of on the back end of that spike, so that the python has digested the tennis ball, if you will. Health spending and drug spending are decelerating.
Q: But do people see the slowdown in spending? Nearly three-quarters of people surveyed in Kaiser Health poll in 2015 thought the cost of drugs was unreasonable. Yet prices keep going up. In May, Lilly raised prices on nine drugs between 6 percent and 10 percent. Pfizer raised prices on 91 drugs this year by an average of 20 percent. Where is the price ceiling on drugs?
A: I think you have to take the Kaiser poll and others like it with a grain of salt. In polling, it’s really about how you ask the question. If you ask any consumer about any product and whether they want it for less, of course, the answer is going to be yes. But the questions are not being asked with regard to the nuances or trade-offs that would be involved. So, for example, if you asked patients if they were willing to trade off access to better treatments and cures for lower costs, you get a different answer.
Q: Isn’t out-of-pocket spending on drugs increasing sharply?
A: Even though drug prices are decelerating, patient out-of-pocket spending has grown substantially. Over the last three years, out-of-pocket spending by consumers is up almost 50 percent. The question that we’re asking is, why aren’t pharmacy benefit managers and health plans that are in a heavily consolidated position and putting downward pressure on our members, why aren’t those discounts making their way to patients at the point of sale?
If I’m a patient, and I go the hospital, and the hospital is in-network, or I go to the physician office, I’m paying the negotiated amount between the plan and those providers. It’s only when the patient shows up at the pharmacy and pays based on the list price for the list medicine.
So we absolutely have to ensure that those discounts and rebates, which have doubled and tripled over the last few years, are making their way to patients.
Q: Medicare is the nation’s largest buyer of prescription drugs, but it is prohibited by law from negotiating prices. A poll shows that 87 percent of Americans want the government to negotiate the drug prices to give consumers a better deal. What’s wrong with that?
A: You already have a system within Part D that is one of the most successful government programs of all time. It’s 40 percent under budget. It has record-high patient satisfaction. It features private market negotiations between our members and [pharmacy benefit managers] and health plans. It produces on average about a 30 percent discount on the products. So we believe it’s really a terrific program and leads to better health outcomes.
Q: But will your industry agree to negotiate with the government on Medicare Part D drug prices?
A: No. Again, if you look at the United Kingdom or other markets where the government plays a central role in determining coverage and negotiating, you find that patients have less access to emerging therapies, including cancer therapies in the [United Kingdom], for example. We think the track record in Part D is very strong and would oppose efforts to have the government negotiate prices directly.
Q: A few months ago, your organization unveiled a new media campaign called “Go Boldly,” which was meant to extol the work of drug researchers. Fortune magazine called it “Big Pharma’s epic multimillion dollar PR campaign to save its reputation.” Was that a fair description?
A: I’m relatively new to PhRMA; I’ve been with the organization for about a year and a half. I made a real effort upon coming to the organization to get out in the field. So I took over 60 trips last year to really get out and tour the research labs, meet with the researchers and scientists in the industry.
I came away from those interactions with two things: One, we really are entering a new era of science. It’s really hard not to be excited about the advances on the horizon. I really do think we’re on the cusp of a golden era in medicine.
The second thing I was struck by: I had a number of conversations, whether it was in town hall meetings with employees or the researchers in the labs that were really disheartened by a lot of the coverage of the bad actors. The typical researcher can spend years in pursuit of a new therapy and fail most of the time. Most companies in our membership are spending billions in R&D, and it’s a long, hard-fought process. And yet Mylan and Valeant and some other companies who really aren’t taking the same risks and investing in R&D were absorbing a large share of the media attention.
So the Go Boldly campaign really has three pillars. One, get people excited about the science again and really highlight this new era of medicine we’re entering into. The second piece we’re referring to as the value collaborative, which is designed to bring stakeholders together to talk about how the payment paradigm needs to evolve in our industry, moving from volume-based models to value-based models.
The third piece is around public health and really highlighting the role the industry plays in meeting emerging public health threats, like zika or ebola.
Q: So it wasn’t just a PR campaign to save your reputation?
A: Well, obviously, we are focused on enhancing the public’s and policymakers’ understanding of the value the industry brings to patient care. As I said, the industry has absorbed some negative attention based on the actions of relatively few number of individuals.
The reality is, a lot of the attention, whether it’s Martin Shkreli or Valeant, you’re talking about 50-year-old drugs, 100-year-old drugs, where there’s lack of effective competition in the marketplace. Those are really hedge funds masquerading as pharmaceutical companies.
Q: Is that the primary reason your organization voted last month to kick out drug companies that spend less than 10 percent of sales on R&D?
A: We did feel it was important to walk the walk. We made a real effort to differentiate our members from the actions of the few I just mentioned. It’s intended to focus our membership on companies that are committed to the long, hard work of investing in R&D and bringing better treatments and cures to the market. I’m quite proud of our industry’s track record in this regard. We spend more on R&D than any other industry. The average of our industry is more than 20 percent of sales.
Q: Let’s talk about drug advertising for a minute. It’s nearly impossible to watch the evening news or a sporting event on TV without seeing a half-dozen or more pharmaceutical pitches. Why so much advertising?
A: I think anything that enhances the communication between a patient and physician is a net positive. I think about medicines that have been developed that target mental health issues, where for many years there was a stigma attached. Direct-to-consumer ads can play a valuable role in stimulating conversations between patients and their physicians, where they otherwise might not.
Q: But aren’t most physicians pretty aware of benefits and risks of medicines on the market. Can’t they make a decision about what to prescribe without a patient walking in and saying, “I saw an ad last night for XYZ drug. Is it right for me?”
A: I guess I just disagree. I think democratizing information is a net positive. And today, with physicians increasingly overwhelmed by the burdens of practice, I think more information is a positive thing.
Q: The United States currently imports thousands of items from overseas, from steel to farm produce, with appropriate safeguards and often lower prices. Why not pharmaceutical drugs?
A: Well, they’re completely different products that have life-or-death consequences if you get the wrong thing. If you think about the opioid crisis today, where we’ve got fentanyl literally flooding the marketplace, moving toward a model where you’re going to allow shipment of products through Canada, for example, we think would open the floodgates for problematic products to flow into the United States.
It’s one thing to get a bad banana. It’s quite another to get a cancer medicine that includes something like lead paint or doesn’t have the active ingredient intended for the patient.