BioPharm Executive: Ok, So It's Hillary

Published: Oct 28, 2016

Ok, So It's Hillary
October 26, 2016
By Karl Thiel for

Here's why her campaign to control drug prices has probably contributed to higher prices

I'm so eager for this endless, awful election cycle to be over that I'm going to just pretend that it is. So congratulations, President Hillary Clinton, on your historic victory (and also thanks to the majority of voters for preventing an unprecedented national disaster).

And with that out of the way, what is your administration—likely to get off to a rocky start—going to look like? More specifically, how will the life sciences industry fare under your presidency?

As I'm writing, Clinton is all but assured the White House, while a Democratic takeover of the Senate looks more likely than not. There have even been some mumblings about the House, although that looks very likely to stay in (somewhat less firm) Republican hands. That means Clinton will not only hold the Executive branch, but she may actually have a chance of getting some legislation through here and there.

And that's probably making a lot of pharma execs unhappy about now.

Hillary is certainly familiar with, and familiar to, the healthcare industry. In this campaign, she's made drug price controls something of a centerpiece. You can read about her most recent take on the issue in detail right here, but in brief her plans include eliminating write-offs for advertising, "clearing out" (somehow) the FDA backlog for generic approvals, allowing reimportation of pharmaceuticals and—perhaps most notably—getting rid of the "non-interference clause" to allow Medicare to negotiate prices with drug companies.

What's interesting about this is that she has arguably moved to the left since she chaired Bill Clinton's Health Care Reform Task Force back in 1993. That year's failed Health Security Act went for a rather wonkier strategy of establishing an "Advisory Council on Breakthrough Drugs" that would weigh in on new approvals and determine the "reasonableness" of launch prices, based on things like prices of other similar drugs, cost-effectiveness and quality of life improvements. But it didn't actually have any authority to change prices, and the Clinton plan at least paid lip service to being against price controls in general.

Now her strategy is a little more interventionist. And it's also gaining a good deal of popular support. (For the record, Donald Trump has also backed at least two critical parts of her plan—reimportation and direct Medicare negotiation). In the past year, we've seen one outrageous price hike after another, from Turing Pharma to Valeant and onward, and after each one voters get a little more willing to consider some new legislative fixes. Yet the hits just keep on coming. Why?

Consider Mylan and its utterly hamfisted approach to a 500%+ price increase on EpiPen at a time when it should have been absolutely clear what an outcry this would cause. Is its management team stupid? Clearly not—the company's canny subsequent decision to launch its own generic, while shifting some of the burden off individuals and back to insurers via coupons, means that they'll probably make a lot more money. Yet they've also tarnished their brand, made themselves a political target and made the prospect of formal controls a little more likely. All for who-knows-how-much additional profit before a rival generic launches, presumably next year.

Is that really worthwhile? Only time will tell, and I of course don't know exactly what Mylan's executive team was thinking. But I have one guess: Like other companies, they see a cycle where companies are raising prices in anticipation of controls, while each price hike makes those controls more likely to become reality. It only stops when the threat of reform dissolves, or it becomes clearer what form it takes. After all, if actual price controls were to follow the model of, say, Medicare reimbursement, we'd have a system where annual price increases were limited to a certain percentage of the existing price. If you're selling drugs, it's better to make the starting point as high as possible.

In the meantime, it's possible that Clinton will end up with enough political capital to make some of her reforms happen. But frankly, the ones on the table are mostly about squeezing the balloon in one spot, only to have it pop up elsewhere. None are likely to meaningfully rein in rising prices.

Which means we've just had a frenzy of price hikes, to be followed by very little change. It's a bit depressing.

-Karl Thiel

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