I have some thoughts on the obesity hearing today, but I have one other request: can we try to talk about the event without using the verb “to grill”? Not every congressional appearance is a grilling. Break out the thesauraus.
The full FTC lawsuit against the PBMs is out. It has lots of charts and graphs that look similar to those in the FTC’s big PBM report from July. It also has lots of redactions, which makes the whole thing seem cooler and more mysterious than it actually is.
But the key bit comes at the end, when the FTC details what it wants out of the lawsuit. It comes down to three things:
1. Prohibit Respondents from excluding or disadvantaging low WAC versions of high WAC drugs made by the same manufacturers whenever the Respondent covers the high WAC drug on a formulary.
2. Prohibit Respondents from accepting compensation based on a drug’s list price or a related benchmark.
3. Prohibit Respondents from designing—or assisting with designing—a benefit plan that bases patients’ deductibles or coinsurance on the list price, rather than the net cost after rebates.
I don’t know how those demands sit as a matter of law, but they’re hard to argue against as a matter of public policy.
It’s going to be all Bernie, all the time, today. The obesity-price hearing is underway as this hits your inbox. You can watch here if you are a masochist. I suspect it’s going to be — as one reader termed it — a circus.
You may be safest just ignoring the whole thing. We’re unlikely to learn anything from the questioning because the point here is not to illuminate or even persuade, but to embarrass.
And who wants to watch that?
Still, this is a good excuse to address a myth about drug prices: they’re not based on R&D expenditures. This is a chestnut that has come up twice in Bloomberg News coverage in the past day, from a reporter who has been around long enough to know better.
The most notable example is this story, which comes to a striking conclusion: not only has Ozempic/Wegovy made back whatever R&D investment created those medicines, the sales from those drugs are likely to exceed the collected R&D expenses of Novo going back three decades.
That’s all very dramatic, but it isn’t “undercutting a key argument for their unusually high prices,” as Bloomberg put it.**
Medicines aren’t priced based on R&D. They’re priced partly on value — defined in no small part by the competitive environment and the willingness of payers to grant access — and partly on the need to incentivize innovation.
You may not think these are great justifications. You may think this is not what is driving pricing decisions. But it’s what companies are actually arguing. The R&D thing is, at best, a strawman.
That’s not to say that R&D is not a large expense or that companies are not investing ever-larger sums just to keep the innovation engine humming, but I can’t think of a medicine that has launched in the last decade in which the company said: “Hey, we’re pricing this at $X because we need to recoup our R&D investment.” That’s not the way the system works.
Overemphasis of the nonexistent link between R&D spend and price might feel like a petty crime, but it draws attention away from real and meaningful questions around value.
That said, “value” is not some sort of “get out of jail free” card for innovators that can be invoked without engendering pushback. There ought to be healthy converation about how we define what’s “worth it,” to whom, and in what context.
But that’s not a conversation we’re going to get today. Sorry.
** Bloomberg also predicted “fireworks” at the hearing today, which is also probably going to be wrong, unless you think that extended Bernie rants are actually explosive.
***
Because every good circus has a sideshow, there is also this news that Sen. Liz Warren and Rep. Lloyd Doggett think that the Biden administration should break patents on obesity medicines.
Normally, when pols advocate for taking a baseball bat to IP protections, they talk about “march-in rights,” which suggests that the government has some role in development and deserves some power around pricing. But this effort is around “Section 1498,” which proponents say gives the government wide latitude to just seize IP.
(That’s probably not right, on the legal merits, but this is not a place where I want to get in over my head today. Just know that this is a very aggressive reading of what the government can do to blow up patent rights.)
Sometimes, there’s not much that can be said about a story other than “go read this.” Such is the case for this story/essay from John Carroll of Endpoints, who has gone through, and is still going through, a harrowing experience with Merkel cell carcinoma.
John’s story is compelling, but he also opens the aperture enough to show the way that the economics of drug development help — and, often, frustrate — the human beings who rely on drug development for their very lives.
So read the story, and please send healing vibes in John’s direction.
Elsewhere:
Drug. Prices. Are. Not. Skyrocketing. They’re falling (per SSR Health). Spread the word.
Sen. Bill Cassidy has already asked a couple of hospitals and some pharmacies about their 340B policies, and now he’s asking Amgen and Lilly for data as well. This has been a slow-burn effort from Cassidy, and it’ll be interesting to see what he does with a more fulsome perspective on the program.
More coverage of Hatch-Waxman at 40: STAT and Tradeoffs have a deep look at where the generic drug industry is looking wobbly four decades after the law that gave birth to the world’s most dynamic generics market.
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