GSK executive: More voices make drug-healthcare cost debate different from 1990s

The ever-more public debate about the price of prescription drugs and healthcare overall is not the first such debate.

But GlaxoSmithKline's Jamey Millar, senior vice president for managed markets and government affairs, said Thursday in Philadelphia that this discussion feels different from the early-to-mid 1990s when then-First Lady Hillary Clinton led an effort to reform how America's expensive, inefficient, gap-ridden, dysfunctional healthcare system operates.

And the difference, Millar said, is only partially a function of Clinton running for president.

"A reason it is different today is that the provider voice is much more active today," Millar said. "We used to think they were blind to the out-of-pocket realities of the price of drugs. But they are much more vocal now. Providers are also much more at risk because of the bundling model."

Though some doctors remain in two-or-three person practices, many more doctors today operate as employees in larger groups, often tied to hospitals. There is a different, but related, complex equation for those doctors who try to augment their pay and practice by administering medicine themselves, often high-priced medicine. In "bundling models," doctors or hospitals can share some of the cost and risk of drugs and how patients are treated.

Millar did not ignore the patient aspect of the overall equation. He noted that many patients, if they have insurance, are seeing higher premiums, deductibles, out-of-pocket costs, co-pays and so-called "co-insurance" costs. And, despite the progress made through the Affordable Care Act, many Americans still have no health insurance.

Millar noted the report from the Centers for Medicare and Medicaid Services that U.S. health care spending increased 5.3 percent to $3.0 trillion in 2014. The report, published in Health Affairs (link here) said the portion of gross domestic product devoted to health care spending was 17.5 percent, up from 17.3 percent in 2013, and the growth in retail prescription drug expenditures increased by 12.2 percent in 2014.

"It seems very different this time than it did in the early 90s," Millar said.

Millar works from GSK's facility in Research Triangle Park in North Carolina. GSK has operations in Philadelphia's Navy Yard and surrounding suburbs.

Millar spoke on stage with Terry Hisey, a senior life-sciences principal in Deloitte's Philadelphia office, in the opening panel discussion at  Eyeforpharma's "Real World Evidence & Market Access Summit 2015" at the Wyndham Hotel in Old City.

The gist of the two-day meeting, which concluded Friday, was how pharmaceutical companies can best use real world evidence to get their drugs to market and justify the prices they attach to the medicine.

My Inquirer story (link here) from Thursday's early panels discusses some of those topics.

None of the issues are easy to solve because everyone is involved, financially, even patients. As Steve Collis, the CEO of drug wholesaler AmerisourceBergen, once told me in an interview, when the portions of food get smaller, people's table manners start to deteriorate. In the same way, Hisey said every healthcare system participant has to fight the tendency to say, "Feel free to think outside any box but mine."

Compromise and collective sacrifice are in short supply.

Generally, patients would like more care, more convenience, while paying nothing, either out of pocket or through taxes. Healthcare organizations - including ones legally deemed nonprofit, such as many prominent hospitals - want to bring in as much money as possible.

For-profit companies are legally obligated to maximize profits or they will face lawsuits from shareholders. Some of their CEOs also find it easier to justify their $20 million pay packages. Some nonprofit healthcare CEOs also have seven-figure salaries.

Hisey said his clients are trying to get beyond thinking of pricing based on unit costs, but the discussions are just beginning.

"It is a multi-variable equation and they are working on all sorts of different elements," Hisey said. "It is a complex problem. We can't simplify the problem. Our goal needs to be to make it simpler to deal with.

One of the flash points in the recent debate on drug pricing occurred in September when hedge fund manager Martin Shkreli used his newly-acquired Turing Pharmaceuticals to obtain the U.S. license for Daraprim, and raised its price by more than 5,000 percent, from $13.50 to $750 per pill. Daraprim is used to treat or prevent serious parasitic infections, and is often taken by people with HIV, whose immune systems are weaker. With a limited population of patients, few companies make the drug.

Shkreli initially reacted to a flood of national criticism by saying he would lower the price of the pill. But at a forum held Thursday by Forbes magazine, Shkreli said his mistake was not raising the price higher.

"My shareholders expect me to make the most profit," Shkreli said, according to a post on Forbes.com. (Link here.) "That's the ugly, dirty truth."

Later, he added, "I'm going to maximize profits. That's what people [in healthcare] are afraid to say."

Before Shkreli made his latest comments, GSK's Millar noted that Turing was at one extreme of the pharmaceutical industry spectrum and not indicative of GSK. Indeed, Millar said, GSK owns the rights to Daraprim in the United Kingdom and sells it for less than $1 per pill.

In speaking about Gilead's high-priced hepatitis C medicines, Sovaldi and Harvoni, University of Michigan business professor Erik Gordon agreed with Shkreli's point that for-profit companies are only set up to maximize profits - but then suggested that national healthcare might solve that problem by removing the profit motive.

"Gilead is not a quasi-public, quasi-charitable organization," Gorden said via email. "Nobody should be surprised that a for-profit company attempts to maximize its revenue from the projects that are successful. It might be better for the government to nationalize healthcare, including drug discovery and development. Then it can set prices, directly, as well as provide the capital to deliver health care and be responsible for operating losses."

GSK is headquartered in London and the United Kingdom has national healthcare paid for by taxes. In the last UK election, which had conservative Prime Minister David Cameron retaining power by a wider-than-expected margin, the liberals and conservatives argued over which side would spend more on national healthcare, a far cry from the U.S. political debate.

GSK remains very much a for-profit company, but it is has taken steps to find a place in healthcare landscape that is farther from the Turing and Valeant Pharmaceuticals model than others still doing serious research.

Though he was moving the company this way for several years, GSK's CEO Andrew Witty said in May that he thought GSK had a better chance for long-term success, including sustainable profit, if it shifted away from aiming only for high-priced, so-called blockbuster, drugs. The rationale was the price pressure on all medicine was only going to increase in the United States. The rest of the world - a much larger market - already had lower prices and was in no mood to adopt the U.S. model. Wall Street, which likes drug companies to sell drugs at the highest possible prices to help generate high profits, did not react well.

Some analysts have dismissed the more recent and more public discussion of drug prices by saying that the industry's big-budget lobbying efforts will stop any efforts to cap prices.

Andrew Baum of Citibank wrote in a note to clients, "Early outlines of Hillary Clinton proposals to slow the rate of U.S. pharmaceutical expenditure reflect an aggregate of many previously dismissed or abandoned strategies (direct Medicare negotiation, cap on co-pays, re-importation). We see enactment of these proposals as improbable even with a Clinton presidency given the Republican control of Congress."

Witty's comments in May (Inquirer story link here) - backed up by the new GSK board chairman - followed the closing of a multi-billion dollar, three-pronged deal with Novartis. The companies formed a joint venture to sell non-prescription consumer products, with GSK having operational control. GSK got all of Novartis' vaccines (except flu) and cash. Novartis got GSK's existing cancer medicines, which were not leading the pack of new oncology products. That prompted some on Wall Street to suggest GSK was abandoning research.

GSK did not sell the oncology compounds still in the research phase, which it hopes will yield profitable drugs in the future. It has tried to fight the perception that it was abandoning research in interviews and in a day-long presentation to investors in November in New York.

"We want to be both, meaning innovative and have people be able to access and afford our medicine," Millar said in an interview after his panel discussion in Philadelphia. "Was Andrew prescient or looking into his crystal ball? This is a trend that has been going on for some time. Our company, and we're not alone, wants to be able to do both, bring innovation to the market that is affordable and accessible."

Besides doctors and patients, insurance companies and pharmacy benefit managers are also exerting greater influence in the for-profit healthcare market place. They and their stockholders want returns on their investments just like those of drug companies. Millar said those unaligned financial incentives "cloud" the path to a healthcare system that includes evidence of how drugs work and who assumes financial risks in any risk-sharing agreement. We live in a world where data is king, but collecting data in proper, universally agreeable ways is very difficult, time consuming and expensive. Agreeing on any meaning from the subsequent analysis is more difficult.

The human element can't be excluded. Even if they know it's better not to, some people will continue smoking, eating juicy cheeseburgers with potato chips and refusing to exercise. And then there is the element of chance.

"If you have a risk sharing agreement on an osteoporosis drug, and Betty has a hip fracture, whose fault was it?" Millar said, referring to a condition where bones weaken as people age. "Was she compliant with the drug, meaning she took the medicine? Was she going to fall anyway? This is where some risk-sharing agreements collapse of their own weight. It is very difficult to come to an agreement over a long time frame."

As others have, Millar said the 12-month budgeting process for governments and companies - along with quarterly demands for profit from Wall Street and Main Street investors - doesn't mesh well with the idea of trying to achieve better health outcomes over decades, much less at lower costs.

"Healthcare and healthcare delivery is not a 12-month cycle," Millar said. "If you have chronic disease, you have chronic disease. To measure outcomes in a 12-month budget cycle just doesn't make sense."