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 country.”
Trump doubled down at his State of the Union speech that “the drug prices will come down substantially. Watch.”
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 success.
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.
“Genuinely needed 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 unexciting.
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 regulatory veil.
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.
Yet 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 system.
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.
Genuinely needed 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