SAN DIEGO – Drug pricing: Often drawing groans and sighs of resignation, those two words have managed to creep to the forefront of nearly every panel discussion as the biopharma industry gathered for the annual BIO International Convention amid increasing scrutiny by the U.S. government, expectations of an executive order from the White House – though a draft review by the New York Times indicated the latter tended more toward eliminating regulatory hurdles than actual price curbing – and the anticipated unveiling of a health care bill Thursday from Senate Republicans.

As BIO's CEO, Jim Greenwood, noted during a session Monday: "The future of the industry right now really hinges on how we come out of this pricing thing."

That out-of-pocket drug costs are becoming too high for the average consumer is something on which most people agree, though they disagree on which part of the health care ecosystem – drug companies, insurers, pharmacy benefit managers (PBMs), Medicare/Medicaid – bears the responsibility. And the rampant public shaming isn't helping matters.

"We've devolved into a lot of finger-pointing and name-calling" in the debate on drug affordability, said Ron Cohen, president and CEO of Acorda Therapeutics Inc. and outgoing chair of BIO. "For an independent observer, their head must be spinning trying to figure out what's going on."

Cohen moderated a panel, including veteran drug company execs – Jeremy Levin, CEO of Ovid Therapeutics Inc. and former head of Teva Pharmaceutical Industries Ltd., and David Meeker, vice president and head of Sanofi Genzyme at Sanofi SA – and PBM representatives Jeffrey Berkowitz, vice president at United Health Group and CEO of Optum International, and Steven Miller, chief medical officer, research and clinical services, at Express Scripts. Panelists admittedly were among the "converted" – PBMs typically are "trained to beat the living daylights out of the pharmaceutical industry," Miller joked – but seemed to agree that it would take all the various segments of the health care system working together to address the affordability issue, preferably before government can step in with innovation-stifling regulations.

There is "legislation seriously being proposed," Cohen said, including reimportation and import price controls, that is "putting the full force and weight of the federal government" behind it, "which is not a negotiation. It's 'You do it our way or you don't do it at all,' which would be ruinous."

Elevating the dialogue

Ironically, the rising costs are due in large part to the huge advances made by the drug industry in the last few decades.

The advent of both PBMs and insurers in the 1960s "did a great thing," said Express Scripts' Miller. They provided access to health care and "spread out the cost for that occasional patient who needed that really expensive drug." Now, however, those really expensive drugs are more common and, even when they are game-changing, result in more pressure than the system can bear.

PBMs have to look across the entire market. During years in which a large number of new drugs enter the marketplace, there's less flexibility. "We are tasked not by the drug but by the total drug spend," Miller said. So when a product such as Gilead Sciences Inc.'s hepatitis C drug Sovaldi (sofosbuvir) prices at $1,000 per tablet, PBMs did the math and didn't like what they saw. So even though it was a "spectacular" drug in terms of its cure rates in hepatitis C, Miller said, "I knew all my plans would be underwater."

So how does the system take into account those "spectacular" drugs, moving from volume to value? That "requires people to actually talk to each other," Miller said, something all the panelists agreed doesn't happen often. Even with consolidation in the system – Optum's Berkowitz noted there are now only five health plans "that really matter," two retail pharmacy chains and three main PBMs – a lack of cross-sector dialogue persists.

Ovid's Levin attributed that to companies not having people trained to understand that dialogue. "I think the vast majority of innovators don't have the resources to bring in the people to have that discussion." Of more than 4,000 companies, "there are only a couple of hundred who actually know who to call. There's a gap in understanding who to talk to."

And those conversations among drug developers, payers and PBMs need to happen much earlier.

Dupixent (dupilumab) was offered up as a positive example for early discussions with the right players. The FDA approved the atopic dermatitis treatment from Regeneron Pharmaceuticals Inc. and Sanofi earlier this year, and it was priced at $37,000 annually before discounts, rebates or patient assistance. (See BioWorld Today, March 29, 2017.)

"We started the dialogue early, before approval," explained Meeker, noting, interestingly, that "early conversations weren't about the drug; they were about the disease." Atopic dermatitis is "not a little rash; what we're talking about is the more severe form of that." That was the message Sanofi and Regeneron had to convey.

A bigger test is coming with the potential first U.S. gene therapy. Spark Therapeutics Inc. completed its rolling BLA last month for SPK-RPE65 for blindness-causing REP65-mediated, inherited retinal dystrophies. Because there are currently no treatments for that indication, there's no "medical spend," noted Miller. So payers are going to be asked to spend a large amount - $1 million or more – per treatment for a product that can help children see better. It's not going to give them perfect vision – "they still can't read newsprint," he said – but the impact on patients and caregivers will be what sponsors need to emphasize.

The question of how the product will affect the overall market must be answered, too. It "is probably going to be the first gene therapy [in the U.S.]," he added. "It's probably going to happen this year and we don't have a system for pay" for it.

In Spark's favor, however, is that SPK-RPE65 is intended for a tiny patient population. The bigger challenge will be when one-shot treatments for larger patient groups start hitting the market.

Social contract

Still, pricing for future drugs is only part of the debate. The biggest – and most headline-screaming – controversies for drug developers have occurred in the past couple of years due to astronomical price hikes of existing drugs, namely Turing Pharmaceuticals Inc.'s toxoplasmosis drug Daraprim and Epipen from Mylan NV. But plenty of other firms have also made it a habit to increase prices of existing drugs beyond inflation rates.

"The reality is that it's often the raising" of existing drugs' prices that is putting pressure on the system, said Miller, noting that the large increases are unique to the U.S. health care system. When a drug is launched, its initial price takes into account a return on investment. "You can't blame it on anyone but the manufacturer for raising prices."

Many companies see raising prices on existing drugs as "an opportunity to meet earnings," agreed Meeker. "But that is going to break the system."

Levin was even more adamant. "The fact of the matter is that price increase [on existing drugs] is unconscionable."

It's a sentiment echoed a day earlier during a fireside chat with Allergan plc CEO Brent Saunders, who made waves last year with a blog pledging the Dublin-based firm's social contract to patients that covered pricing and access. Among the promises, Allergan aims to "set our net in line with inflation," he said, raise prices only once per year and keep gross product price hikes under 10 percent, all in addition to expanding patient assistance program.

"Is this the end-all, be-all? Absolutely not," he said. "It's a starting point."

In Saunders' view, the biopharma industry has no choice. "I think the political reality is that the biopharmaceutical industry is so unpopular right now," he said. "Even people who have been our champions are having a hard time."

The sector needs to "get our own house in order," before pointing to insurers and PBMs, he added. Members of Tuesday's panel also stressed that biopharma has do its part in addressing drug pricing and accessibility.

"We're all vested in this system," said Sanofi Genzyme's Meeker. "If the system breaks, we lose."

"It's up to us in the end," Cohen concluded. "Everyone here is in it for the patients, and if they're not, they should be."