o one seems to know what President Trump will say when (or if — he has postponed before) he addresses the nation this week on drug pricing. But the content doesn’t matter nearly as much as the implications. The mere fact that drug pricing has become such a populist issue that this president is devoting a policy speech to it will almost certainly roil markets and raise the collective blood pressure of pharmaceutical company CEOs.
When it comes to drug prices, an increasingly vocal majority of Americans now feel they’re being treated unfairly and that there is very little transparency about how prices are set. A recent PatientView study, for example, showed that only 13 percent of patients thought pharma companies effectively explain pricing policies.
A March 2018 Kaiser Family Foundation Health Tracking Poll found that 80 percent of Americans think prescription drug prices are unreasonably high. Slightly more than half responded that enacting policies to lower them should be our government’s top policy priority. And 72 percent said the pharma industry has too much influence in Washington — ahead of Wall Street and the National Rifle Association.
The president has already called for action on drug pricing and Alex Azar, head of the Department of Health and Human Services, has appointed a senior adviser to focus specifically on the issue. We’ll learn more this week about what sort of action Trump has in mind.
The industry is in a tough spot to defend itself. Several companies have been called out for spiking prices on older or marginally innovative products. Television’s “60 Minutes” just did a very unflattering segment on the issue. More scrutiny will surely follow, as this issue resonates among both Republicans and Democrats heading into mid-term elections. PhRMA’s “Go Boldly” campaign is attempting to push a counterbalancing message out there, but at the moment it’s like shouting into a strong wind.
What should the pharma industry do?
If the industry wants to avoid knee-jerk policy and market responses, it’s time to double down on direct community engagement, be far more transparent about pricing, and seek to redefine value from the patient’s perspective.
What the industry needs right now is a Responsible Care program.
In the late 1980s, the chemical industry created this program to push companies to explain their health, safety, and environmental practices. This was a period of intense focus on the effects of chemicals on the environment and human health, catalyzed by the tragic industrial accident in Bhopal, India, that killed more than 3,000 people. After Bhopal, what had been a simmering issue came to a full boil. The industry needed an earnest, credible, and sustained response.
Responsible Care provided a much-needed opportunity for industry to explain its practices and chemistry’s role and value in our daily lives directly to communities in which chemical plants were located, end users, and society. At the heart of the program were Community Advisory Panels, composed of chemical plant personnel, local emergency responders, civic leaders, and citizens. Company representatives presented environmental and workplace safety plans to the panels, reported on performance, and explained what chemicals were used in the plant, and for what purpose.
Most of the major players in the industry participated, and the program had a significant positive impact on the industry’s reputation as well as its market and policy environments.
The pharma industry faces perceptual and political dynamics similar to what the chemical industry faced back then. Pharma’s response needs to lead with direct stakeholder engagement, and be at least as aggressive as the chemical industry was, or we risk a shift that might appeal to popular sentiment near term but could set back innovation and drug development for a decade or longer.
What should the pharmaceutical industry’s response look like?
The Responsible Care program worked because it compelled companies that were part of the industry’s biggest trade association to agree to a set of principles and embrace a higher level of transparency.
A similar model could work today, enabling pharma to bring greater consistency, context, and clarity to drug pricing. Participating companies would engage with patient advocates, researchers, clinicians, health economists, and other stakeholders via disease-specific community advisory panels using modern methods of communication and analysis — virtual and in-person meetings, data-driven collaboration, and the like. The panels could explore key variables influencing drug development and pricing, and possibly uncover new opportunities to collaborate and reduce costs.
A far-reaching, community-focused effort like this is needed to guard against ill-conceived policy and to assure that the vast majority of pharmaceutical companies taking on risks to innovate aren’t discouraged or significantly disadvantaged in continuing to do so. That unintended consequence would ultimately have a far greater and more lasting negative impact on patient access to needed therapies than the current squeeze of drug pricing.
Craig Martin is a global principal with Ogilvy RED Consulting specializing in the environment, life sciences, biotech, health technology, health care, wellness, and pharmaceutical sectors. He does not consult directly on drug pricing. He also serves on the board of Global Genes, a rare disease patient organization. The opinions expressed here are his own.