CEOs Sound Out on Health Reform: Stop Swinging from the Fence

At last week’s  4^th annual Prix Galien Forum hosted by the Alexandria Center in New York, industry leaders gathered to discuss trends and developments that shape the intersection between science and policy.  The centerpiece of the day was a panel on  US health reform – focused on rollout of the  Affordable Care Act - featuring three CEOs:  Merck’s Ken Frazier, Alex Gorsky of Johnson & Johnson, and Eli Lilly’s John Lechleiter.  Commenting on what all three agree is the most contentious pieces of federal legislation in recent history, the panel summed up the industry’s fears in noting the lack of incentive the law provides for continued innovation in drug development as well as the prospect for much more price scrutiny around new drugs, even those that present significant value over the current standard of care.

Frazier began the discussion by noting that the law’s title is a misnomer, dubbing it more appropriately as “The Affordable Insurance Act,” as it is geared toward providing insurance rather than delivering good care.  He went on to say that the law is not aimed at changing the current delivery model for health services, arguing that while the ideal goal is to make a smooth transition from fee-for-service to more accountable, outcomes-based care, there is no certainty that accountability is going to be institutionalized within the system in the way that supporters of the Act contend.

All three CEOs agreed that while the upside to the act is that it creates a bigger base for increased access to medicines for patients, high out-of-pocket costs for consumers guarantee an unprecedented amount of strategic uncertainty for the industry for years to come.   The uncertainty is centered on whether the new system will actually reward innovation through the uptake of new drugs with “unquestioned, unambiguous value.” The panel was quick to note that with NIH funds drying up and in the midst of a sluggish economic recovery, investors just aren’t too enticed by taking risky bets on compounds whose ultimate benefit to patients remains unknown:   “swinging for the fence all the time can be costly,” as Gorsky put it.

Quick to bemoan pricing restrictions, each  CEO lambasted even the mere idea of the Independent Payment Advisory Board to determine a ceiling on overall health expenditures – in which spending on drugs is likely to come up short and be first to cut.   Precedents from other countries were cited as rationale. “We’ve already done the experiment in Europe,” Frazier commented, explaining that pricing controls in the EU have essentially limited new entries to the pharma toolkit that these single-payer systems rely on to help patients manage a growing burden of chronic diseases.

The current iteration of the ACA mandates state-governed exchanges to offer enrollees ‘at least one’ drug per therapeutic category in the treatment of major diseases.  The grand assumption that cheaper generics will reign supreme over brands, even with strong evidence of the latter’s clinical superiority, prompted Lilly’s Lechleiter to protest “You can’t kill the market in order to provide access.”

Throughout the discussion, however, the executives remained upbeat that the ACA is a step in the right direction – and that affordable coverage for all citizens is an ideal worth striving for. Congressional Budget Office data pushing for increased access and a focus on providing more preventive care also drew positive comments, due to the message found therein that medication adherence is a good deal for health overall. Giving the final word, Lechleiter cited the metaphor of Massachusetts’s Romney care law; a smaller version of the ACA passed by the Massachusetts state legislature in 2006 and was extensively amended as it was rolled out. So too, he said, will Obamacare be modified as it evolves, and there’s hope yet for changes that will allow makers of new medicines to have their seat at the table.