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Tom Cowen, Head of Vertical Strategy, Healthcare & Life Sciences at Conga.
What lengths would you go as a parent if your child couldn't get their chemotherapy dose?
My family runs a Childhood Cancer Foundation, so I spend time on Childhood Cancer Facebook groups. I am not easily shocked. However, in mid-July, multiple parents reported Methotrexate rationing for children with Osteosarcoma. As a former cancer parent, I knew these parents' desperation firsthand. I confirmed the facts in an article a week later.
Less than a month later, I read another mother's account that St. Jude's main hospital was directing her to another St. Jude's location hours away to receive Cisplatin, the second of three drugs that make up the MAP therapy for Osteosarcoma.
According to the University of Utah Drug Information Service, there were 301 active national drug shortages in the U.S. during Q1 2023. That number was 49% higher than during the same period in 2018. Several causes, including the exploding demand for Ozempic and Adderall, captured most of the headlines. Deep in every drug, there was a story, and the report on generics (including Methotrexate and Cisplatin) centered around pricing and supplier viability. According to 3 Axis Advisors, "In 2015, pharmacies spent about $11.6 billion on generic drugs for people on Medicaid. In 2023, those very same medicines would cost $5.4 billion, adjusted for inflation."
Today, Jackson Healthcare's CEO, Rick Jackson, struggles to make a case for his Tennessee plant as the only one capable of ramping up to fill the nation's Amoxicillin needs in a crisis. Pricing pressures, interest rates, and energy prices may have bankrupted another U.S.-based generics manufacturer, Akorn Pharmaceuticals. Warned Elisabeth Stampa, chief executive of Medichem SA, a generic drugs and pharmaceutical ingredients maker based near Barcelona, Spain, "We may discontinue maybe three, maybe five products due to the direct and indirect impact of increasing energy costs."
As patients, parents, and consumers, lower pharmaceutical prices are better. When the government gets involved in driving down soaring healthcare costs, those efforts can be heavy-handed and only sometimes thoroughly thought out. On August 29th, the Centers for Medicare and Medicaid Services announced the first ten drugs for re-negotiation under the Inflation Reduction Act. These ten drugs accounted for $50.5B or 20% of Medicare Part D spending. We are still waiting to see the effect of public negotiations on drugs that account for 20% of spending with probably another 10-20% from their competitors.
In December 2022, the Wall Street Journal published an article reporting that U.S. and European health regulators had recently approved four products priced at more than $1M per patient. McKinsey estimates that 30 new gene therapies could be introduced in 2024. While we can only predict how governments will officially respond to the world of million-dollar drugs, the sound bites about Big Pharma and their million-dollar drugs are undoubtedly ripe for use by legislators worldwide. It is easy to forget in these diatribes that some drugs may eradicate lifelong chronic conditions.
Pricing and government involvement run the spectrum. From several decades-old generic drugs to some of the most used drugs to the latest vanguard of therapies, the government's involvement may result in fast and heavy-handed results that don't ultimately serve the patients, be it an older adult with heart disease, a patient with Hemophilia, or a child with cancer. In the long term, the potential to stifle innovation in certain therapeutic classes is foreseeable. So, how can pharmaceutical manufacturers prepare for these events?
Two ears, one mouth
Government speaking can be very nuanced and patterned and may take place over days, months, and years, depending on the latest news cycles. Covid-19 was clear evidence on many levels. Listen to what is being said from all sides and plan accordingly for each brand. While many let out a sigh of relief that they weren't part of the Medicare first ten, plan on the worst case if you are a competitor or have a drug in the pipeline.
Focus on Outcomes
Better patient outcomes support higher prices, which will be no more evident than in the emerging Cell and Gene-based therapies. Collect clinical patients and stay closely aligned with pioneering medical centres. Explore and test outcomes-based pricing models for your particular therapeutic classes. How will risks and benefits be shared? How should these be contracted for in the short and long term? What does the settlement process look like?
Establish a More Agile Pricing Structure
Market analytics and responsive pricing and rebates are critical in the high-stakes world of the Medicare drugs scheduled for negotiation. Responsive pricing is a foundation of the generics market, along with competitive knowledge of supply. Stay abreast of current outcomes-based price negotiations and observable trends in that emerging space. Fortify your pricing and market analytics, re-evaluate your processes to reduce cycle times and build agile pricing programs that can respond to the changing market moving from concept to contract quickly.
Reduce Contracting Cycle Times
The Medicare first ten list may require rapid amendments to Medicare and other contracts that may adjust as fallout of the negotiations. The same may be true for the competitive set of drugs, which seek to make moves in the re-positioning. The ability to amend many high-revenue contracts quickly and accurately may be paramount to success in the ensuing months.