After attending the 37th edition of JPM, I left San Francisco more optimistic about the biotech industry’s future than at the anxious end of 2018. A trade war with China and the longest government shutdown might weigh on economic growth and tighten the IPO window, but that’s not the overriding sense from anyone I met. Important new treatments and actual cures are bolstering private and public capital markets. And despite the still increasing cost of bringing a therapy to patients, a fairly predictable regulatory framework is enabling more approvals than ever. Hopefully, the key elements of stable investment, regulation, reimbursement and thirst for new treatments from large pharma will keep biotech in the business of helping patients.
The headwind that concerns me and many others at JPM is the potential for government to intervene on drug pricing. During one breakfast panel discussing the “high cost of drugs,” an epiphany struck me: government is focusing on the wrong thing when they think about drug pricing “solutions.” Voter and politician outcry is not truly about list or net prices, but rather patients’ own out-of-pocket costs from co-pays, deductibles, and cost-sharing for their prescription drugs.
Patients have a right to be outraged at this. High deductible plans are now the norm. Cost sharing for prescription drugs is increasing and co-pays keep going up. To government, the plan to “lower drug costs” may seem like a simple solution. But to a patient, is that going to help reduce their out-of-pocket costs? As both a consumer of healthcare and of conference hotel rooms, the following analogy may be apt. Business travelers to JPM don’t care about high San Francisco real estate and labor costs to own and operate a hotel. Outrage at quadrupled room rates each second week of January is somewhat theoretical as the convening is necessary to conduct business and expenses will be presumably fully reimbursed by the company. However, if their company were to change its travel policy to cover just 80% of business expenses, they might feel like the patient asked to pay $20,000 dollars out-of-pocket for a $100,000 list price life-extending therapy.
Everyone in our healthcare ecosystem must get on the same page with voters and policy makers to come together with solutions that both reward our companies developing important new treatment options for patients, while sustaining affordable access for patients. And we don’t all need to travel to San Francisco to do so. We’ll be debating issues around pricing and access at our State of Possible Conference, taking place March 27-28, 2019. Join us!
– John Tagliamonte, Entrepreneur in Residence at MassBio