Insurer steps into drug pricing controversy
Insurance will play a huge role in the developing drug pricing controversy. Healthcare commentator, Ezekial Emanual, opined in yesterday’s New York Times that new drugs, particularly PCSK9 inhibitors for cholesterol control, are entering the market at prices well above their utility as measured by the extremely clinical, but widely used, “Quality-adjusted Life Years” measure. Now, of course, Amgen (a PCSK9 maker) may not agree with Emanuel’s calculations and that represents just one of the problems.
Emanuel fairly raises the question of whether the drug/healthcare industry will self-regulate the issue. The alternative, “death panels” from the government, are highly unlikely based on prior debates.
Some answers to his question are found in today’s Boston Globe. At the macro level, the national drug trade organization, PhRMA, seems to be backing away from overly aggressive pricing strategies like the highly reported efforts of Turing and Valeant. That suggests that the industry is willing to draw lines in order to protect itself from regulation.
Closer to the Boston Globe’s home, insurer Harvard Pilgrim Health Care (HPHC) is reported to have inked a deal with Amgen for a risk-sharing model of pricing based on performance.
Pharmaceutical companies, and particularly young biotechnology companies face a large risk in this battle. One justification for high prices of new drugs is the need to reward risk-taking shareholders of young drug companies. HPHC and Amgen seem to be working toward a version of that dynamic pricing model with risk shared by insurer, payer (business/consumer both) and the drug company. Perhaps this is the best answer we can find right now and it surely is a development well worth watching closely.
About the Author
Phil Edmundson is the Area Chairman of Gallagher WGA with over 30 years in the insurance industry. He manages innovation, strategy, talent acquisition and development for this leading insurance brokerage.