Prices Will Come Down
Substantially. Watch.” This is the president of the US talking about drug
prices during his State of the Union Message to the US Congress!
The New Year is
already full of intrigue, and we’re only a few weeks into 2018. The last week
of January in particular threw a 1 – 2 – 3 punch at the industry:
The new US Secretary
for Health and Human Services (HHS) Alex Azar was sworn in. On the surface it
may sound like good news to have one of industry’s own to guard the hen-house.
But his confirmation hearings repeatedly pushed him to confirm that lowering
unreasonable drug prices will be his top priority, echoing the language the FDA
Commissioner Scott Gottlieb has now practiced consistently. More noteworthy are
the comments by President Trump at Azar’s swearing-in that the HHS secretary
will get the US drug prices “way down…because it is very unfair to our
Trump doubled down at
his State of the Union speech that “the drug prices will come down
As if on cue, JPMorgan
Chase & Co, Amazon, and Berkshire Hathaway announced that they are going to
do something to disrupt healthcare, (let us call this consortium ‘JAB’, as our
healthcare systems around the world really do need a jab in the jaw if a new
path is to be paved.)
Many pundits rushed to
pronounce JAB the patent treatment to cure all that ails the healthcare
systems. “Disruption is finally here” has been the common refrain.
As the dust settled,
however, experienced experts pushed back on this notion, listing more than a
handful of initiatives by major corporations over the past couple of decades,
all to break the cycle of healthcare cost spiral, but with little or no
The commentary around
the JAB announcement centered on how Amazon may have found the creative path to
begin to reshape the healthcare system. Bringing the likes of
Warren Buffett of
Berkshire Hathaway and entrenched financiers of JPMorgan along should only
bolster its resources to tackle a challenge that others have failed at.
The incumbent leaders
of the current healthcare establishment (which includes the comparatively
well-resourced biopharma sector) are concerned of course, but seem inured to
this relentless restlessness among practically all of their stakeholders.
biopharma products have nothing to fear. But a significant majority of products
may be doomed.”
And the fact is that
any effective control of drug costs has remained elusive, and the options for
the very vocal government leaders seem limited—so far. Yes, the FDA can speed
up generic approvals, and somehow improve its maze of regulations that enable the
biopharma companies to game the competitive landscape, and thereby pricing.
Secretary Azar has more levers at his disposal, but the present Washington
climate precludes many of the most potent initiatives, including granting CMS
powers to negotiate drug prices. Perhaps this government has a secret plan that
can revamp the system, but for now it remains mostly talk, and hence
The excitement around
the JAB consortium announcement is anchored around its ability to bypass
various regulatory constraints that limit government officials’ capacity to
act. The JAB should be able go after the way PBMs seem able to skim at both
ends of the value chain, and circumvent insurance companies’ profit motives
that put them in cahoots with PBMs and others trying to take advantage of the
The combined employee
size of the three JAB companies is small at around one million, but not so
small that their technological prowess and global scale could not become an
impactful test case. They are sure to have studied their predecessors’ lack of
material success, and must be planning to deploy better tools and incentives
for their employees, harnessing the increasingly powerful IT bandwidth of today
to lead to much more rational healthcare choices.
this is likely to take longer and yield meager results, unless the JAB
initiative finds a way to break away from the present healthcare system, which
can be best described as a mound of Band-aids.
The idea is simple,
though obviously it calls for radical steps. Put the patient truly in the
center, with a holistic online tool that enables her to invite all who care for
her, from providers on the one hand, to a personal network of family, friends,
and other patients on the other; and enable this small team to see the patient
data, and communicate real time. This tool enables the right member of this
team to respond to patient needs and should provide motivation, education and
better outcomes. The patient has a team/network of providers who can practice
medicine as good doctors were trained to do.
I am talking about the
creation of a parallel health care offering. Start with self-insurance by
employers, to remove the self-interest or profit motive introduced to the
system by the insurance providers. Then a post-acute and outpatient care
platform for example provides positive reinforcement when the patient is well
controlled, and thus can be well managed remotely, with much greater
contribution by the patient’s personal network. This would save substantial
time and cost. And this remote care delivery can continue when active
intervention is needed, now with greater engagement of the medical provider
team. Only during acute episodes do these patients need hands-on care, for
which a fresh, new initiative can bypass the currently sclerosed approach. This
calls for the setting up of a group of well-trained, like-minded and closely
monitored providers who can practice best standard of care. This practice
structure would enable normal diagnostics and basic malpractice insurance, with
little need for defensive medicine, nor for irrational malpractice insurance.
Is the JAB consortium
thinking this boldly? Only time will tell. Are they capable? Of course, as are
most other such initiatives, provided they can be peeled away from the current
Impact On Pharma
How would any such
initiative change the biopharma incentives? The piecemeal approaches by various
governments and other participants continue to bloody the industry’s nose, but
leave their profit focus more or less in place. A JAB consortium willing to be
venturesome would change the industry practice fundamentally.
The biopharma company
would get paid for the value it creates. In other words, we all know how Apple,
Samsung or any other IT product vendor must survive. The customer will pay for
the value. True, healthcare choices are not so simple, but on this patient
centered platform anchored on value and fully integrating standard of care,
each prescription will be more readily chosen objectively and rationally.
biopharma products prepared to be evaluated along this value framework have
nothing to fear. But a significant majority of products may be doomed, as is
the case with so many electronic products.
The JAB consortium has
a great opportunity to pierce the regulatory veil, the veil that distorts the
healthcare system at every level. More importantly, such an initiative can
demonstrate how a parallel, effective option can be created well and
impactfully. Only one such success will usher in a rationally functioning
healthcare system. A healthy society cannot be far behind.
This column originally
appeared on Scrip Biopharma Intelligence, February 12th, 2018