Latest Drugwonks' Blog

From the pages of Fierce Biotech …

The FDA is lukewarm on those hyper-valuable vouchers for fast drug reviews

Big Pharma has been willing to pay hundreds of millions of dollars for a shortcut to FDA approval, buying up priority review vouchers created to incentivize new drugs for neglected diseases. But the agency seems less than enthusiastic about honoring its end of the bargain, with one top official expressing concerns about how the voucher program might harm the FDA's core mission.

In an interview with Pharma & MedTech Business Intelligence, FDA Office of New Drugs Director John Jenkins said the agency's long-held problems with priority review vouchers have been "amplified" as more and more companies line up to redeem them. And the market value of the vouchers has skyrocketed over the past year, with one going for $350 million in August, suggesting the issue isn't going away.

The voucher program, created in 2007, works like this: Any drug company that wins approval for a new drug that treats a rare pediatric disorder or neglected tropical disease is given a one-time coupon, which, when redeemed, shortens the FDA review process from 10 months down to 6. And, in a move designed to encourage R&D into such under-served diseases, winning companies can sell their vouchers to anyone they please and at whatever price.

But what's not negotiable is that 6-month timeframe, and that's what worries Jenkins. "In effect, these programs allow sponsors to 'purchase' a priority review at the expense of other important public health work in FDA's portfolio," he told PMBI. The FDA has a finite amount of time and resources available at any given time, and allowing one company to cut in line inevitably affects the agency's ability to do its job elsewhere, he said.

And the universal applicability of a priority review voucher could also create problems, according to Jenkins. A drugmaker could--as Sanofi did--use its coupon on a primary care treatment that would be used by millions of patients. Such drugs require multiple large clinical trials to support approval, and thus their applications are complex and time-consuming. "Reviewing such an application in 6 months is very challenging," Jenkins told PMBI, and the voucher program does not provide any additional staff to follow through.

Despite regulators' concerns, however, the program is a hit with industry, which is paying more and more for the privilege of a quick review.

The first voucher to change hands came from BioMarin, which sold the coupon to Sanofi and Regeneron last year for $67.5 million, helping the pair leapfrog Amgen in the race to launch a new class of cholesterol treatments. Months later, Gilead Sciences paid $125 million for Knight Therapeutics' voucher in hopes of accelerating its HIV pipeline, followed by Sanofi splurging $245 million for Retrophin's priority ticket and AbbVie promising $350 million to United Therapeutics for the same asset. Last month, AstraZeneca paid an undisclosed sum for a voucher of its own.

Here’s the full Jenkins interview.

Donald Trumps PBMs?

  • 10.09.2015

Pharmacy benefit managers make money by denying care

By Peter J. Pitts

Special to the Mercury News

Donald Trump, Hillary Clinton and Bernie Sanders all think that healthcare is too expensive. But they're looking in the wrong places for savings. In 2012, the CEO of the nation's largest pharmacy benefit manager, Express Scripts, earned about $1 million every week.

PBMs can afford such rich compensation because they increasingly refuse to pay for patients' medicines. In 2016, Express Scripts will deny coverage to 124 medicines -- up from 95 drugs this year. America's second largest PBM, CVS Caremark, announced that it will banish an additional 14 drugs from its 2016 list of covered medications, in addition to the 66 forbidden medicines in 2015.

By refusing to cover specialized drugs, Express Scripts and CVS Caremark aren't just denying patients access to lifesaving medication. They're also driving up healthcare costs for patients.

PBMs design and maintain drug formularies, the lists of medications available under particular health plans. Their influence is massive because PBM-administered plans cover more than 210 million Americans insured through employers, unions, or government programs like Medicare Part D.

PBMs can play a valuable role as middlemen in the healthcare system. They streamline the drug purchasing process by supplying thousands of pharmacies and insurers with prescription contracts. They also hold healthcare spending in check by using their immense purchasing power to negotiate large discounts from pharmaceutical manufacturers. Their profit comes from pocketing any rebates they extract from drug makers that they don't pass on to pharmacies and insurers.

However, the largest PBMs -- particularly Express Scripts and CVS Caremark -- increasingly abuse their role and pad their bottom lines by simply refusing to cover certain lifesaving drugs.

CVS Caremark, for example, recently took to the Journal of the American Medical Association to promote the use of cheaper statin medications rather than specialized new drugs that can cut "bad" LDL cholesterol levels in half. Doctors have called the new medicines a "game-changer" in the fight against coronary artery disease.

Innovative drugs are often the groundbreaking ones that revolutionize treatment of serious diseases. Consider Sovaldi, which PBMs have attacked as "unreasonable" due to its $84,000 price tag. Yet the drug cures 90 percent of hepatitis C patients in a 12-week treatment with vastly reduced side effects. Previous treatments took up to a year and cured only half of patients.

Last year, pharmacies sued Express Scripts over its "scheme to deny all claims" for certain customized medications. "The scheme is forcing patients to go without treatment," the suit stated, "jeopardizing their health and causing bodily harm, or forcing them to pay out-of-pocket sums that they may or may not be able to afford for basic healthcare needs that have been prescribed by their doctors."

Without medicine, many patients grow sicker and require more expensive care in hospitals and nursing homes.

Prescriptions are almost always the most cost-effective treatment option. The Congressional Budget Office estimates that a 1 percent increase in prescription use by Medicare beneficiaries causes Medicare's total medical spending to fall by about one-fifth of 1 percent.

So in effect, PBMs are passing the buck to insurers and government healthcare programs, which are on the hook for pricier treatment regimes.

Most people would find it shameful to withhold medications from sick patients, especially since doing so raises the financial burden on consumers and taxpayers. Unfortunately, America's pharmacy benefit managers are adopting this callous strategy with increasing frequency.

Mountain Due

  • 10.09.2015

I’ve just returned from the glorious Mountain West (Salt Lake City to be precise) where I attended the Utah Employer Healthcare Summit.

One of the panels I attended, “Healthcare Consumerism,” included a regional exec from Aetna. He bragged on his firm’s “commitment to transparency.” As an example he described their new customer app. I commented that giving people access to their own data wasn’t transparency. That got things going. The next question came from a physician who asked why they don’t share information about the discounts they get from drug manufacturers. His response was classic, “because it’s confidential.”

The physician was not assuaged. Quite the contrary.

The issue of the role payers play also became a central theme on the panel I participated on, “The $84,000 Pill.” One of my main points was that payers regularly receive significant discounts on medicines – and then don’t pass along the savings to consumers. The audience was largely comprised of employers and I made sure they understood that the same issue holds true for PBMs and their consumers – employers.

Allow me to share one telling moment. Another panelist, an executive from a large regional PBM, was explaining why they can’t afford “$84,000 for Sovaldi.” I (politely) interrupted him to ask, “Many large payers are getting upwards of a 50% discount on Sovaldi.” He shot back, “We’re only getting a 38% discount.” “Well,” I said, “then maybe you should stop talking about an $84,000 pill and start talking about a $52,000 treatment that cures the patient 90+ percent of the time.” His snappy comeback? “It’s not that simple.

“The truth,” as Oscar Wilde quipped, “is rarely pure and never simple.”

When it comes to the CDC’s new opioid guidelines, attention must be paid -- immediately and publicly. This is the message from a growing constituency of physicians, patients and policy experts concerned and upset about both the CDC’s conflict-ridden, secretive process and, even more importantly, the guidelines themselves.

Regarding the CDC’s lack of transparency, consider first the comments of the California Medical Association:

It is deeply concerning that the details behind the 12 recommendations are being made available to some unknown organizations and individuals for review and comment, but not to the general public. The information available to the public was so limited and the time to comment so brief, that it created the perception that the end result has already been determined. Further, it is inappropriate for a public agency to limit the stakeholders from whom they will accept comments. All entities should have the same opportunity for review and comment. In addition, an anonymous summary of comment is also not part of a transparent public process, as it allows for potential CDC reinterpretation of the comments. The public must also be able to assess the potential biases and the opioid prescribing expertise for those involved in the creation of the guidelines.

And from the American Cancer Society:

We have concerns that the attempts to solicit public input on the draft guidelines were cursory and did not allow adequate opportunity for thoughtful responses. While a public webinar was held to discuss the recommended guidelines, it was not well advertised and many interested parties were denied access because the webinar lacked sufficient capacity. Further, only a brief summary of each of the recommendations was shared, with no supporting documentation to provide evidence, context, or insight into the process. The public had 48 hours to comment, a rather abbreviated time period when compared to typical 30-90 day comment periods for similarly impactful proposed policies by the administration. By legal definition the guideline is not a proposed regulation subject to the Administrative Procedures Act, but clearly the intent of CDC is that the guideline be distributed to and adopted by state public health entities and certifying organizations as if it had the legal authority of a regulation. Given the potential public impact of the proposed guidelines, CDC should provide more complete information to the public regarding their draft guidelines and provide commensurate opportunity for input.

Of greater importance are the issues with the proposed guidelines themselves.

Per the California Medical Association:

CMA is particularly concerned about the impact in our state, where the Medical Board of California (MBC) recently conducted a year-long, fully transparent public process that produced well-balanced opioid prescribing guidelines (see enclosure). Health care practitioners who treat pain in diverse settings were extensively engaged and given ample opportunity to provide feedback. The detailed guidelines reflect the realities of patient care and underscore the extraordinary complexity in treating pain. For example, to stress the need for flexibility, the MBC guidelines state in the preamble that “Medicine is practiced one patient at a time and each patient has individual needs and vulnerabilities” and the language in the MBC document reflect this statement. The guidelines also include an extensive discussion about the nature of pain and the treatment of pain that was not reflected in the CDC recommendations. We are also concerned because the CDC recommendations include a ceiling dose that is in conflict with California’s guidelines, which creates confusion and could have legal repercussions.

And the American Cancer Society points to the fact that the guidelines aren’t based on solid evidence:

CDC purported to follow a widely used framework for producing evidence-based recommendations known as GRADE (Grading of Recommendations, Assessment, Development and Evaluation) to create the proposed guidelines. In reality, however, CDC appears to have deviated significantly from the established methodology, calling into question the integrity and validity of the ensuing recommendations. Seven of the 12 recommendations were based on “very low quality of evidence” and five of the 12 on “low quality of evidence,” yet six of the seven recommendations with evidence rated “very low” and all of the recommendations with “low” evidence ratings were designated as “strong” recommendations. The GRADE process ordinarily permits this discordance only in exceptional circumstances, and this stark departure from GRADE methodology was done without associated justification. The rationale statements appeared to rely heavily on expert opinion, but this was not explicitly acknowledged.

Further, the ACS asks a crucial question, why has the CDC factored in cost in the guidelines development process?

We take strong exception to the use of cost data as an input to the guidelines. The costs highlighted in the document deal with non-medical use, abuse and overdose of opioids, but no mention is made of the costs due to chronic pain. Further, while costs may be a valid consideration in the context of GRADE methodology, it is wholly inappropriate for the government to use cost, rather than efficacy, to suggest restricting access to treatments that patients pay for themselves through copays and insurance premiums.

Bottom line:

CDC’s recent efforts are not appropriate, nor transparent … We strongly urge that CDC provides CMA and others with a reasonable opportunity to provide meaningful comment on such a critical issue.

-- California Medical Association

We share the goal of reducing inappropriate use and adverse events related to opioids, but we also have grave concerns about unduly restricting access to appropriate and effective pain management for individuals with cancer and other chronic conditions. We are concerned that the draft document does not reflect the appropriate weighing of benefits and harms at the individual and population levels, a fundamental element of rigorous guideline development. The process that the CDC followed departed from reliance upon evidence and methodological rigor, as well as accepted standards of transparency. We strongly suggest that CDC withdraw its draft guideline and instead focus on generating additional data to inform future guidelines as well as ongoing educational efforts on harm and abuse prevention.

-- American Cancer Society

The full comments from the California Medical Association and the American Cancer Society are worth a careful read.

An opaque and inappropriate process results in flawed and inappropriate guidelines. Attention must be paid.  

From the fine folks at RAPS ...

FDA Launches Pilot to Standardize REMS Information for Easier Systems Integration

The US Food and Drug Administration (FDA) has announced a four-month pilot to make Risk Evaluation and Mitigation Strategies (REMS) easier to share and integrate with existing pharmacy and health information systems.


With the passage of the 2007 Food and Drug Administration Amendments Act, FDA was granted the authority to require manufacturers to develop REMS for new and approved products.

These plans are intended to enable companies to better manage known or potential risks their products carry, and may be required as a condition for approval.

Then in 2012, as part of the Prescription Drug User Fee Act (PDUFA) reauthorization, FDA agreed to take steps to "measure the effectiveness of REMS … standardize REMS, and with stakeholder input seek to integrate REMS into the existing and evolving healthcare system."

To fulfill these commitments, FDA in 2013 held a public stakeholder meeting on standardizing REMS, followed by an expert workshop which evaluated "current approaches in the design, development, implementation, and assessment of REMS, limitations of existing methods for the design of REMS programs, and existing approaches to identify, evaluate, and mitigate risks that can inform REMS design."

Pilot Project

Following the stakeholder meeting and expert workshop in 2013, FDA developed four "priority projects" related to REMS to tackle in the coming years.

Today's pilot announcement marks the launch of one of these priority projects, which is intended to integrate REMS into Structured Product Label (SPL) format, which will make it easier for these documents to be integrated into pharmacy and hospital IT systems.

FDA says that stakeholders have "expressed concern that information about REMS materials, tools, and requirements are not communicated … in a clear and consistent manner," and that "REMS materials and requirements may be difficult to locate."

The agency also says stakeholders have reported "difficulty integrating REMS materials and procedures into their existing … systems."

FDA says it believes this pilot will "address many of the concerns … regarding REMS because SPL information can be easily shared and made available online." The agency also says both it and manufacturers are already well-versed with SPL, which will make transitioning to the format fairly straightforward.

FDA says it is looking for no more than nine volunteers to take part in the pilot and asks interested parties to apply by 7 December 2015. The pilot project is slated to run from 6 October 2015 through 3 February 2016, and may be extended if necessary.

Federal Register

Some thoughts on Expanded Access and so-called "Right to Try" legislation from Pat Furlong, the Founding President and CEO of Parent Project Muscular Dystrophy (PPMD) and Tim Franson, Chief Medical Officer at YourEncore.:

Peter: How do you feel about Right to Try legislation and expanded access? Should language and deliverables for expanded access issues be in PDUFA VI?

Pat Furlong: Right to Try legislation is an outcry by the patient community to get some access some way, some how. The Right to Try bills I’ve read, are variable but in general have no real meat on them that give you the pathway to get what you’re looking for. There’s a lot left on the table that is not understood by the patient community.

That said, trials are so narrow.  In the Duchenne space there was a study that used the six-minute walk test and invited anyone who was ambulatory and had the diagnosis.  What we learned from that study is that the sort of sweet spot or area in which we can look at a sensitive measure are children who walk between 250 and 400 meters.  Now, you can imagine if you were a parent in a disease where the child is diagnosed between four and six years old.  He reaches a plateau at about seven or eight in terms of ambulation and then starts to lose those functions. By the time he’s 11 he’s off his feet. By the time he’s 13 or 14 he doesn’t move his arms.  And dead by about 25. So if you’re a little boy, if you’re four years old, you can’t be in the study because it’s seven years and above. If you’re non-ambulatory or if you walk slower than 250 meters or faster than 400, you’re off the bus. And you can imagine being screened for a clinical trial and the physician says to you, “Your son walks too fast. Come back when he’s slower.” Knowing the trajectory of this illness and you say, “What?  I’ll come back in six months when he’s slower?”  Expanded access has to be on the table for these patients because they only have one opportunity.

Peter: Why do pharmas put these rules in place?

Pat Furlong: Companies are reluctant (to offer expanded access programs) because of the expense and because of the worry that it could negatively impact their study. What the Right to Try legislation represents is the importance of providing opportunities and access to patients in need. I think foundations could come in and work with companies if we can understand how they price drugs and be able to support safety studies to include a wider range of patients.

Tim Franson: FDA is not the problem with expanded access. We do have an opportunity perhaps to create new ways to approach the issues associated with expanded access. For rare diseases, what if you could promote all the companies contributing to a common placebo database so that you don’t have to replicate that with every trial? Then that’s good for the patients, that’s good for the development process, and it changes how we approach expanded access issues.

My Take:

Perhaps, as part of the FDA’s current initiatives to enhance both the timeliness and weight of the patient voice, expanded access plan development and execution should involve patient organizations. Maybe it’s time to harness that power to make the process both more-inclusive and better.

Another issue that remains at-large is who pays for access to these unapproved drugs? What a company can charge is regulated (via draft guidance), but sometimes the drug company will bare all costs, other times some costs, and just as often it’s the patient who writes the check. And IRB and other related costs are often borne by the patient. Perhaps there’s a role for the Federal government. How about a fund that pays for access for any approved FDA expanded access IND or protocol?

All sides want the same thing -- expedited expanded access programs. But name-calling and bridge burning doesn't bring anyone closer together or experimental drugs to dying patients any faster. Let’s expedite access by enlarging the Expanded Access Ecosystem.

Ahead of a Trans-Pacific Partnership (TPP) ministerial meeting later this week, a naïve attempt by the Senator from Ben & Jerry’s to generate some post-Papal ink …

WASHINGTON, Sept. 28 – Sen. Bernie Sanders (I-Vt.) today asked the chief trade representative for the United States to ensure people in the poorest countries around the world have access to low-cost medicines.

“Making sure people in poor countries have access to life-saving medicine is our moral responsibility,” Sen. Sanders wrote. “The European Commission and the Holy See both support a permanent exception for drug patents for these poor countries. The United States government should support this as well. Lives are at stake.”

Bernie, FYI -- When you examine the WHO’s model Essential Drug List, very few of the 400 or so drugs deemed essential are new, or patented or were ever patented in the world’s poorest countries.  In category after category, from aspirin to Zithromax, in almost every case and in almost every country, these medicines have always been (or have been for many years) in the public domain.  That is, the medicine is fully open to legal and legitimate generic manufacture.

As John Adams said, “Facts are pesky things.”

Two weeks ago, I covered “The Top 10 Regulatory Issues for Today’s Drug Developers.” One of the 10 regulatory policy topics that keeps me up at night is patient focused drug development – specifically, how can patients help drive development? This topic is even more relevant and complex in the rare disease space.

PDUFA V introduced incentives for rare disease development but other key questions were unaddressed: how to include the patient voice and what is the proper role of advocacy groups, agencies, and industry? In the recent past, the patient voice was limited to teary anecdotes. Parent Project Muscular Dystrophy (PPMD), however, has made groundbreaking strides introducing the patient voice into the Duchenne muscular dystrophy development process – and giving other disease communities a blue print to follow.

I had the opportunity to moderate a panel discussion with Pat Furlong, the Founding President and CEO of PPMD, about this topic and I’d like to share some of this exchange.

Peter: What are your feelings on how PDUFA V moved incentives forward?

Pat: I think PDUFA V crystalized the need for and importance of patient focused drug development, but it gave no definitions or metrics on how it should be done. How do we include a patient voice? What does it mean? How do we incorporate it in a sufficiently rigorous way? This led to PPMD’s interest in benefit/risk and the need to quantify benefit/risk (caregiver/patient preferences) for our patient community. We did a pilot in an effort to explore this with our community and I am hopeful that it set the stage for the broader rare disease community to begin exploring the equation within their communities.

I feel like PDUFA V was an open door to develop models for engagement. Clearly this is new and the FDA is exploring opportunities to include patients/caregivers to better understand their preferences and what matters to patients. The FDA is driven by data and in that, patients have an extraordinary opportunity to engage, to inform, and to develop models and systems in which the patient preferences are known and understood and considered within the review process.

Peter: Is there a shift among the patient community from being social support groups to becoming a source for clinical trial recruitment, outcomes research and benefit/risk social science?

Pat: I think it depends on where you are in the rare disease community. Social networking encourages people to start their own foundation to do something, but for regulatory agencies, it may not be enough to tell your story. We have to be good partners and scientific partners. We who have been here a bit are looking at how to provide data in terms of benefit/risk, how to look at these patient reported outcomes in a rigorous way, and the value of engaging with the Critical Path Institute to develop a disease progression model. We believe good partnerships are critically important for Duchenne and the rare disease community, and we are able to provide the scientific data that’s going to be important and useful for the approval process.

Peter: What’s your biggest ask for PDUFA VI?

Pat: The big ask for PDUFA VI would be more transparency in the review process. Obviously the FDA is not allowed to give a confidential report of what was discussed, but I would like to see them inform the disease community about what was included in that review. Was benefit/risk data available? How did the benefit/risk inform their thinking? Were PRO (patient reported outcomes) available and if so, considered in the review process? For the patient community, it is important to understand what was included in the review process and how that informed/contributed to the regulatory decision.

PDUFA VI discussions are underway and here’s my take on how patient-focused drug development (PFDD) may evolve under the new act:

  1. What happens after the agency has held a disease-specific conversation? Will the agency devise a way to train patient organizations to create draft guidances for treatment pathways?
  2. How early in the development process should the patient voice be heard? Can PFDD mean more than just a variable in the benefit/risk conversation?
  3. What about adaptive licensing? Will the patient voice be a potent one when it comes to Phase IV requirements

Next week, I’ll highlight other experts from this panel discussion and talk about expanded access and Right to Try Legislation.

A savvy move from FDA – choosing someone who understands quality from the other side of the proposition. Only the most recent way that FDA is working to redefine 3D quality and pharmacovigilance.

For more on OPQ and the FDA's Quality Revolution, see here.

Here’s the official announcement from Janet Woodcock:

CDER Staff:

I am pleased to announce that Michael (Mike) Kopcha (“cop-cha”), Ph.D., R.Ph., a globally-recognized expert in product innovation and development, has been selected as the permanent director of the Office of Pharmaceutical Quality (OPQ). He will join CDER in November pending ethics clearance.

Mike is a leader in the development of innovative solutions to resolve scientific, manufacturing, and commercialization issues worldwide – and in standardizing and harmonizing global processes. With more than 25 years of pharmaceutical industry experience, his areas of expertise include formulation and process development, process validation, technology transfer, off-shoring/outsourcing, and change management.

OPQ – with close to 1,000 employees – was stood up in January to carry out new processes and policies to provide better alignment among review, inspection, and research functions. As OPQ director, Mike will take over the reins from me in matters relating to pharmaceutical quality regulation. These include submission review, manufacturing facility assessment, and quality surveillance.

Mike recently served as vice president, and global research and development franchise head, for cough, cold, and respiratory products at Novartis Consumer Health, Inc. in New Jersey. He joined Novartis in 2008 as the global head for pharmaceutical and analytical development, later serving as global head for new technologies and product innovation, and vice president and global head for global product development.

At Novartis, Mike has led the creation of a global R&D vision and strategies to drive innovation for the cough, cold, and respiratory franchise – through development, sourcing, manufacturing, and supply. He restructured and reorganized global product development to provide for a category-focused, globalized organization, and is credited for the creation of a successful strategic off-shoring/outsourcing program to increase project capacity and efficiency.

Before joining Novartis, Mike served as vice president for pharmaceutical development at KV Pharmaceutical, Inc. in St. Louis, where he directed and managed analytical research and development, product development, process development and technology transfer, stability, drug delivery, project management, and external alliance. His experience also includes related roles with Schering-Plough, J&J, and Ivax.

Mike earned his doctorate and master’s degrees in pharmaceutical science, and a bachelor’s degree in pharmacy, from Rutgers University in New Brunswick, New Jersey. He served as an adjunct assistant professor in the Department of Pharmaceutics, Ernest Mario School of Pharmacy at Rutgers.   

Mike will lead OPQ in planning and implementing strategies to drive pharmaceutical quality, with a goal of providing for an efficient pharmaceutical manufacturing sector that reliably produces high-quality medicines without extensive regulatory oversight.

I’d like to thank OPQ Deputy Director Lawrence Yu for his tremendous leadership, guidance, and support as we worked to stand up OPQ, and for assuming many additional responsibilities during my period as acting OPQ director.

Please join me in extending a warm welcome to Mike when he joins us later this fall. He will be a true asset to CDER and OPQ leadership. His broad knowledge and expertise in product development and technologies will allow him to play an essential role in our continued work to assure that the public has access to safe, effective, and high-quality medicines.

Janet Woodcock

From today's edition of the New York Post ...

Why People Don't Trust Drug Makers

By: Peter J. Pitts

When former hedge-fund manager and current Turing Pharmaceuticals chief executive Martin Shkreli hiked the price of his generic anti-parasitic drug pyrimethamine from $13.50 to $750 per pill, he invited understandable national outrage. He also prompted presidential candidate Hillary Clinton to call for price controls on a wide variety of medicines.

The subtext here is clear: Americans think price-gouging on prescription medicines is rampant. This isn’t surprising, since the pharmaceutical industry has done a poor job of explaining why drugs cost what they do. More than three-quarters of Americans support mandatory limits on the price of certain drugs. And 86 percent want drug firms to disclose how, exactly, they set prices.

The best way for drug firms to quell this outrage is to give Americans what they’re asking for: more information. Specifically, the industry needs to shed light on the huge sums they spend on research, their rising research-and-development failure rates and the refusal of insurers and pharmacy-benefit managers to pass on manufacturer discounts to patients.

Of course, drug pricing is a complicated matter. Which is why the industry should focus on a few basic points when making its case.

First, the cost of research. Since 2000, drugs firms have spent over half a trillion dollars developing new medicines. And research costs for the last year alone totaled more than $51 billion. That’s up from $15.2 billion in 1995.

These are extraordinary spending levels, even compared to other research-intensive industries. In fact, the pharmaceutical sector spends five times more on R&D than aerospace, and 2 ½ times more than the software and computer industry. This is the kind of investment that pharmaceutical innovation demands, and it’s reflected in the economics of advanced drugs.

The industry also needs to do a better job explaining just how many failures firms endure searching for the next breakthrough medicine. Drug companies must develop hundreds of compounds until they find one suitable for testing on humans. Of those rare compounds that make it to phase-1 human trials, fewer than 12 percent win approval from the FDA.

That’s why bringing just one drug to market costs an average of nearly $2.6 billion and takes more than 10 years, according to researchers at Tufts.

If drug companies were open and honest about their frequent and expensive failures, they could quash the myth that pharmaceutical research is obscenely lucrative.

Drug prices aren’t merely the result of high development costs. The price of any given drug is the result of a lengthy process of meetings and negotiations between manufacturers and payers over a long period of time — often years before the FDA approves a product.

So when insurance companies demonize the pharmaceutical industry for high drug prices, they’re being more than a little disingenuous. Insurers and pharmacy benefit managers — not drug companies — are the ones who determine what patients pay for medications.

Consider the controversy surrounding the hepatitis C drug Sovaldi. When the medicine came on the market, it quickly became known in the press as “the $1,000 pill.” This may be a great sound bite, but it’s hardly accurate.

In reality, insurers and benefit managers negotiated discounts that reduced the price of Sovaldi by 20 to 50 percent. But they didn’t pass the full discount on to the consumer. Instead, insurers and pharmacy benefit managers pocketed the money to pad their bottom lines and executives’ wallets. Last year, CVS Caremark Corporation, one of the biggest benefit managers, paid its CEO over $32 million.

For many patients, particularly those without insurance coverage, Sovaldi’s manufacturer supplied a coupon ensuring that co-pays for the drug wouldn’t exceed $5.

In other words, the manufacturer went out of its way to ensure that few would have to pay full price for Sovaldi. In cases where patients had to shell out for “the $1,000 pill,” insurers were mostly to blame.

Most Americans, of course, are largely unaware of this information, which is why opinions have turned so sharply against the pharmaceutical industry. If they intend to win back the public, drug companies have some explaining to do.


Center for Medicine in the Public Interest is a nonprofit, non-partisan organization promoting innovative solutions that advance medical progress, reduce health disparities, extend life and make health care more affordable, preventive and patient-centered. CMPI also provides the public, policymakers and the media a reliable source of independent scientific analysis on issues ranging from personalized medicine, food and drug safety, health care reform and comparative effectiveness.

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