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A Thoughtful Discussion on Drug Pricing and Innovation

October 05, 2015
11:53 am

There has been a lot of talk of late about the price of prescription drugs.  Most of it, unfortunately, has come in the form of 30-second sound bites, largely driven by one hedge fund investor’s decision to significantly raise the price of a single product.

Determining the correct price for an innovative, life-changing product to achieve both consumer accessibility as well as a return on investment, which is vital to fund future research and development, is a complex topic that warrants a thoughtful discussion, not glib attack lines.

Credit, then, goes to the Washington Post for its lengthy question-and-answer article with Joseph Jimenez, the CEO of Novartis, one of the world’s leading pharmaceutical companies.  In the interview, Jimenez made, I believe, several striking and instructive points.  Among them:

On price versus value:

“When you look at the cost of development, it continues to go up and up and up. So when we price a drug, we price it based on the value it will bring into that marketplace, and also how its price compares to the other therapies currently on the market. There’s been a lot of discussion about drug pricing. What we have to do is we have to shift that conversation away from the price toward the value. Like, what exactly is the value of this drug that is going to result in a positive outcome? And is society willing to pay for that drug?”

On the ability to use genomics to reduce the overall cost of drugs to society:

“Technology has improved so much in drug development that we now can find genetic markers on patients to ensure that they will benefit from our drug, and we’ll know those patients who won’t benefit from the drug. For example, we just launched a new lung cancer drug that only works in about 3 percent of patients with lung cancer, because only 3 percent have this particular genetic mutation. So we’re able to go to the payers and say, “Yes, this is an expensive drug in absolute, when you think about one patient taking this drug, but you’re not going to waste one dollar on this drug, because we’re only giving it to 3 percent of this population and the impact on the budget is quite small.”

On the value of pharmaceutical collaboration with academia:

“Academic collaborations are very important for the pharmaceutical industry because we do not spend money on basic research, we spend money on applied research. When there’s basic biology that has to be understood, an academic institution is going to be much better at doing that than Novartis. If we partner with them, we can take that learning and we can turn it into a drug.”

I recommend you read the full interview, which can be found here.  Mr. Jimenez’s thoughts provide a foundation for a reasonable discussion regarding medical innovation and patient access, the kind of conversation our society needs to have.