How Not To Talk About Drug Prices
By Mike Kuczkowski
It was, according to Turing Pharmaceuticals CEO Martin Shkreli, “a great business decision that also benefits all of our stakeholders.”
Not so fast, buddy.
Shkreli was referring to his company’s decision to raise the price of Daraprim, a treatment for toxoplasmosis it had recently acquired, from $13.50 to $750 per pill. Some 60 million Americans carry the parasite that causes toxoplasmosis, but most people are unaffected by it. For those with suppressed immune systems, however, like pregnant women or people with AIDS, it can be life threatening.
Turing’s move sparked a rhetorical war on drug prices tailor-made for our social media age. The story, which had been simmering for a couple of weeks in the infectious disease community, was broken by a trade publication Sept. 17. USA Today picked it up on the 18th. The following Sunday, The New York Times wrote about the price increase.
As the media coverage was amplified across social media, people expressed outrage. Shkreli engaged directly in the debate, crossing swords with media and others on Twitter. The 32-year-old tweeted more than 125 messages, many of them brusque and snarky. (He called the editor of one trade publication a “moron;” asked how he slept at night, Shkreli replied “ambien.”)
By Monday, the digerati were salivating at their newfound target: Gawker called Shkreli a “greed villain”; The Daily Beast declared him “Big Pharma’s Biggest A**hole”; a Reddit thread about the story erupted with more than 4,500 comments, including several ill-advised posts from Shkreli; Hillary Clinton tweeted that the price hike was “outrageous.” The S&P biotech index fell 4 percent following Clinton’s tweet.
Describing Turing as “Big Pharma” is misleading. The company was founded in February with three products in its pipeline and one FDA approved product. In August, it acquired Daraprim. Still, the public outrage machine, stoked by Shkreli’s tweets, was in full gear. Shkreli went on Bloomberg TV and CNBC to defend his company’s actions.
Shkreli’s broadcast performance had considerably more depth than his social media outbursts. Despite the occasional uncomfortable smile and body language, Shkreli made a reasonably strong case that the additional revenues Turing would receive from the increased price would benefit patients.
- Saving people’s lives: We’re talking about a therapy that saves peoples lives, isn’t that worth more than $13.50 per pill?
- Comparative value: The pricing of the (in some cases) life-saving therapy was in line with other life-saving therapies, such as cancer drugs
- High costs of doing business: The costs of running a pharmaceutical company, which include manufacturing, distribution and regulatory compliance, are high
- Investing in new medicines: Half the profits from Turing’s price increase would be used to fund research and development
- Unmet need: Daraprim is a fairly toxic drug, Shkreli said, meaning there’s an unmet need for new therapies (this claim was disputed by some doctors)
- Patient assistance: Co-pay relief and patient assistance funds would ensure that patients would not go without their needed medications
- Patients first: The company would provide additional services for patients ‘beyond the pill’
In many respects, it was a strong performance. But, it did not work. Media were not buying his rationale – the $750 pill was exactly the same as the $13.50 pill – and his earlier combative posture poisoned any chance at redemption.
That same day, in what can only be described as fortuitous timing, Clinton outlined her proposal for prescription drug price reforms, including a copay cap of $250 and moves that would allow the federal Medicare program to directly negotiate prices with pharmaceutical companies. This latter move would unquestionably alter the industry’s economics and business model, according to most experts, and runs a strong risk of reducing investment in innovation (though Clinton says it won’t).
Regardless, Turing was definitely experiencing its 15 minutes of fame. For the next two days, “Martin Shkreli” was more popular in Google searches than “Donald Trump.”
On Sept. 23, Shkreli backed down. He took his Twitter account private and announced Turing would lower the price, though he did not say what the new price would be. Clinton’s response, a one-word tweet: Good.
So exactly what went wrong?
Turing never should have raised prices that much to begin with — the business case wasn’t there. But that’s not what made Shkreli our “villain of the week.”
The issue of drug prices appears on its face to be a rational, logical issue. But it’s not. It’s an emotional issue. Specifically, it’s about the confusion, frustration and anger that patients feel at their increasing out-of-pocket costs (which is different, in most cases, from the underlying price of the drug.) This pent-up anger got a release valve with the Turing story, and Shkreli’s lack of empathy ran into that emotional vector like a buzz saw.
That’s instructive because while Turing’s moment under the microscope may be over — or not, depending on the eventual price announced for Daraprim – this won’t be the last time we hear about drug prices as an issue.
This June, at the American Society of Clinical Oncology meeting in Chicago, I saw two converging forces.
The first was rooms full of doctors, investors and executives excited by the promise of immuno-oncology treatments (Disclosure: one of my clients is a biotech focused on immunotherapy). These drugs are expensive to produce. Unlike Daraprim, they represent real scientific advances. They are often showing promise in small patient populations, and may work best in combination with other therapies.
The second was concern about the price tag of these regimens, as embodied in a keynote speech by Dr. Leonard Saltz, of Memorial Sloan Kettering Cancer Center. “These drugs cost too much,” Saltz said before a room full of oncologists and pharmaceutical industry executives. After the meeting, ASCO and MSKCC unveiled new tools aimed at reining prices in.
Those two forces are going to collide. The industry, particularly small biotechs who are betting their futures on successful regimens with small patient populations, are going to need to price their therapies at a relatively high price point in order to be successful in business. Yet payers and health systems are going to do whatever they can to keep prices down.
What should the industry do? There is a case to be made that the best strategy is to let the rhetoric pass and wait out the calls for reform. And, while the industry’s reputation will continue to suffer with such an approach, it might work.
But there’s also a significant risk that drug prices could become the one thing that Democrats and Republicans can agree on, and not in a way that favors the industry. A major policy move would be predicated on clear public support for such a move, and at the moment the industry is doing little to generate public favor. A recent poll showed that 72 percent of Americans think prescription medicines are unreasonable. Another poll says only 35 percent of Americans have a positive view of the industry. If pharma were a candidate for office, it would be out of the race already.
Here’s an alternative approach that could have worked for Shkreli, and can work for others:
Engage stakeholders: Shkreli and his leadership team should have talked to specialists in infectious disease, patient groups and payers – those “stakeholders” he could have been referring to in his quote at the top of this piece – about why the company needed to restructure pricing on the drug. See what tolerance stakeholders would have for a higher priced drug with the benefits of copay relief, patient assistance and additional research and development around toxoplasmosis.
Listen (and act accordingly): I’m fairly certain that if Turing had laid out its plans to stakeholders, it would have heard clearly that the $750 per pill price tag would spark outrage. That should have prompted a whole set of questions about the strategy itself that would drive better actions: Are we right that there’s a need for a less toxic treatment? Can we shoot for a more modest price increase? Can we show that patients need the services we are adding? What else can we do to support the infectious disease community and be a real partner? (I don’t see how you could ask those questions and not make a different move on pricing than Turing did.)
Be transparent: Don’t wait for the story to break against you. Put out information about pricing and the rationale behind it at the earliest possible stage. The several weeks delay between Daraprim’s price hike and Shkreli’s broadcast interviews explaining it cost Turing significant points in the court of public opinion. If they’d had a sound business case for the pricing, they should have put it out publicly.
Gilead Sciences issued the infographic below as a tweet explaining the pricing of Harvoni, a hepatitis C regimen that combines its existing drug Sovaldi with another compound. Harvoni, which costs more than $90,000 for a course of treatment, cures 94 percent of Hep C cases, saving the costs of liver failure and liver transplants, which can cost $600,000 per patient. It also compares favorably with other combination therapies. Still, Gilead taken heat for the price of the drug. They deserve credit for engaging in the conversation about pricing. (Note: this tweet led to a Motley Fool article titled “How Gilead Sciences Inc. Isn’t Gouging Hepatitis C Patients in 1 Simple Infographic.”)
Reference credible third parties: It’s hard for a pharma CEO to say, “doctors need this” and then be confronted by a journalist who says she just got off the phone with a doctor who says they don’t. No pharma executive trumps a doctor on matters of patient care. If an infectious disease specialist agreed with Shkreli, then it becomes an entirely different conversation. Specialists have a halo of credibility that commands respect and changes the conversation. Even credentialed experts within a company, such as lab scientists or chief medical officers, can serve in that kind of role, though external third parties who have no financial interest in the company are the best.
Act with empathy and compassion: I could rewrite this as “stay off Twitter,” but that’s too glib. Pharmaceutical company leaders need to demonstrate a fundamental understanding of what patients face when they have a serious health condition. That’s the starting point. Don’t start with “profits are essential.” Start with, “We’re working to give patients and physicians what they need.” And when you say that, have the research, insights and actions to back up that claim.
The world can look at what Martin Shkreli did as a cautionary tale and decide that there is no upside to talking about drug industry pricing. I say, look at what he did wrong and learn from it.