When the president attacks your product, you’ve got a problem, Houston. Which is why the pharmaceutical industry is trying to craft a warmer, fuzzier image.
Donald Trump complained repeatedly about high drug prices while campaigning last year, and during a press conference right before taking office he said drug companies are “getting away with murder.”
He had plenty of material to work with. The big controversy over the price of the anti-allergy Epipen, which rose 600% in less than a decade, caused outrage last year. Before that, Turing Pharmaceuticals drew flak for raising the price of an anti-parasite drug by 5,500%, as did Valeant by hiking the price of two heart drugs by 700% or more after acquiring the rights to them.
The bad publicity has prompted the drug industry to launch a costly new ad blitz highlighting scientific breakthroughs sponsored by drugmakers and ways prescription drugs contribute to better health. “Let’s change the system so people pay for value,” Bob Hugin, executive chairman at biotech firm Celgene (CELG) and a spokesman for the industry, tells Yahoo Finance in the video above. “Our drugs do that and we can do that better.”
The drug industry faces several major risks with Trump in the White House. Current law prohibits the government from negotiating discounts with drugmakers, for billions of dollars of drugs purchased under Medicare. Trump could push for new legislation giving the feds more clout. Trump also plans to replace the Affordable Care Act with something else, which could affect how and how much drugmakers get paid.
The price of prescription drugs rose 6.2% in 2016, according to government data. That’s about three times the overall rate of inflation. But some consumers feel a more painful sting for drugs that aren’t covered by health insurance or require big co-pays or other out-of-pocket expenses. People without insurance can face stratospheric costs if they need life-saving, brand-name drugs for which there’s no competition.
Hugin advocates “value-based” drug pricing in which insurers, drug-makers and patients would negotiate prices based on how effective a given drug is for a particular condition. That would require gobs of new data, providing better insights into what works, than we currently have. “We want a rigorous, comprehensive review of how we deliver healthcare,” Hugin says. “Put the patient at the center, make sure the patient has access to the kind of healthcare the patient deserves, and do it in the most cost-effective manner.”
Drugmakers, not surprisingly, would also like to see insurance policies that leave patients with better coverage for pharmaceuticals and fewer out-of-pocket costs. They’d like a faster approval process at the Food and Drug Administration for new drugs and generics, and simpler rules regarding how they must report prices to the government. And they’d like more transparency by insurers ahead of time regarding which drugs they’re likely to cover and how much they’re willing to pay.
Trump hasn’t weighed in on such ideas in detail, but he favors fewer regulations, more efficient government and, naturally, healthcare that’s cheaper and better for patients. So Big Pharma may find Trump to be an ally in some cases. But pricing is Trump’s go-to issue, and he’s unlikely to cut drugmakers some slack until they give him a victory he can crow about.
Rick Newman is the author of four books, including Rebounders: How Winners Pivot from Setback to Success. Follow him on Twitter: @rickjnewman.