With debate and argument over what is to blame for high drug pricing, this report sought to examine the executives’ reasoning and attitudes behind pricing decisions.
High list prices are needed to support research and development in the pharma and biotech industry: For years, that has been one of the reasons cited to support the way prices work in the drug industry. But a qualitative study with 4 biotechnology executives involved for decades in the pricing and selling of multiple sclerosis (MS) disease-modifying therapies (DMTs) said the reason has more to do with maximizing revenue and corporate profit.
The study, published last week in Neurology, said that pricing decisions were not the result of needing to recoup specific costs. Rather, these executives cited other factors, which are unique to the United States.
The authors noted that soaring drug prices have particularly impacted therapies for MS. In fact, a recent paper published earlier this year in JAMA Neurology found that even as additional biologics for MS entered the market, the prices of self-administered DMTs for MS rose steadily from 2006 to 2016, and seniors with Medicare Part D coverage saw a 7.2-fold increase in out-of-pocket costs. For Medicare beneficiaries who have 25% to 30% coinsurance amounts in their Part D plans, out-of-pocket costs can exceed $6000 for the year.
The average annual wholesale acquisition cost for most DMTs now exceeds $80,000 a year, and patients, affected by higher cost-sharing amounts, reduced coverage, or increased utilization management, report drug costs as a top policy concern.
With debate and argument over what is to blame for high drug pricing, this report sought to examine the executives’ reasoning and attitudes behind pricing decisions. Their answers indicated that the “the existing price ecosystem, overall corporate growth, international pricing disparities, and supply chain—related distortions may play a more central role,” the authors said.
The interview consisted of 9 questions, and qualitative analysis was performed with NVivo 11 using a deductive approach. The 4 participants, who agreed to be interviewed on the condition of anonymity, had nearly 30 years of combined experience working with companies making MS drugs.
When it came to initial pricing decisions, the interviewees said that companies generally sought to match, but not beat, competitors’ prices, and in some cases went even higher.
“We can’t come in at less. That would mean we’re less effective, we think less of our product, so we have to go more,” a participant said.
In addition, a participant cited the increasing complexity of pharmaceutical distribution, noting that other players are taking a piece of the list price, which ultimately factors into pricing decisions as well.
Those interviewed were also asked about their justification for pricing decisions, and their answers ranged across 5 themes: promoting innovation, international versus domestic markets, corporate growth, drug distribution channels, and market dynamics.
The role of patents were mentioned in terms of expecting drugs to become less expensive as patents expire, but it was not clear how that impacted bisimilars, the authors reported.
“There hasn’t been the impact of biosimilars in anti-TNF [tumor necrosis factor] or in MS or in cancer or in diabetes at this point. In theory bring it down prices by about 30% to 50%, which is what all the biosimilar manufacturers are saying, but we just haven’t seen that yet because it hasn’t been available,” one participant said.
Another mentioned the need to optimize return on investment for shareholders when developing orphan drugs.
Shareholder obligations and fiscal growth affect pricing decisions, they noted.
The interviews also touched on a facet of drug prices that has been noted in US efforts to control prices with an international pricing index. In effect, US prices make up for lower prices in other countries. The United States accepts increasing prices, whereas in Europe the highest price for a product is seen at launch and gradually falls.
The US also has more complex drug distribution channels; some participants said that having multiple for-profit companies involved in the process is partly to blame for the drug pricing problem.
Two participants suggested that pricing for MS drugs is likely to change in the near future, but the reality of this actually happening is unknown.
The authors noted that the obvious limitation of their study is the small sample size, which may not reflect widespread beliefs throughout the industry, but they said “the limited number of individuals available and willing to speak with us is emblematic of the opaqueness of the pharmaceutical industry.”
In Part B, there are 3 biologics for MS eligible for reimbursement (ocrelizumab, alemtuzumab, and natalizumab).
Last week, Polpharma Biologics said it had begun dosing the first patients in its phase 3 study of PB006, a proposed natalizumab biosimilar.
The cost of MS therapies has recently been criticized by the National Multiple Sclerosis Society.
Hartung DM, Alley L, Johnston KA, Bourdette DN. Qualitative study on the price of drugs for multiple sclerosis: gaming the system [published online November 25, 2019]. Neurology. doi:10.1212/WNL.0000000000008653.