Healthcare Affordability Creates a Trust Gap

Super Session -Seeking Healthcare Sustainability and the Economic Role of Drugs

Consumers are becoming more distrustful of the government because of healthcare affordability. Recently politicians have focused on rising drug costs exacerbated by the drug pricing scandals and collapse of Turing and Valeant Pharmaceuticals, created a perception that the system was broken and needed reform. Drug pricing data is variable because of discounts and special deals but prices are still up 10% in 2015. However specialty drugs are up over 20% and herein lies part of the problem because innovative blockbuster drugs in immuno-oncology and infectious diseases are among the most expensive. A battle has been set up between insurance companies and drug manufacturers by the reimbursement model which is now being squeezed. Insurance administrative costs are at the 20% level and contribute to the cost issue. Consumers are being hit hard by co-payments and rising premiums while some sick patients are being refused drug coverage. Moreover consumer income has been stagnant over the long term.

In response to concerns about rising healthcare expenditures and drug prices BIO has published a White Paper on Biotechnology Innovation and the Business model which requires heavy R&D expenses in the front end. It costs an average of $2.558B to bring a prescription drug to market including $1.460B in clinical studies. At the same time there is an unprecedented wave of technology and new products that must be valued.

The consumer trust gap has raised concerns that politicians will seize the issue and worsen the healthcare affordability crisis through legislation. Radical policy and reimbursement changes can kill biotechnology innovation that has the potential to create disease altering medicines. Biopharma companies need to work through the system to develop new models that focus on and recognize value. For example they need to show that drugs can lower hospital stays, improve patient outcomes and ultimately create wellness.

Some of the solutions presented on the quest for  measuring the value of therapies and reducing costs are:

  • Reduce reimbursement for drugs with bad efficacy. Show cost savings for new drugs.
  • More transparency:release clinical data on new drugs earlier and engage regulators on efficacy.
  • Integrate decision making process by sharing outcomes data on how drugs are being used: biopharma, hospitals, PBMs and FDA.
  • Go with a single payor model for breakthrough drugs like gene therapy.

From this and other BIO sessions on healthcare disruption we need to find new business models and companies that are well positioned to weather the storm. Next generation generation therapies such as gene therapy and innovative software solutions will be closely watched but the large pipelines of major biopharma companies are the current sweet spot.

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