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Wake Up, Pharma—Trump Is Not Your Savior

Opinion

Xconomy Boston — 

Since the election, leaders in biotechnology and pharmaceuticals are acting like they got away with robbery. The Nasdaq Biotechnology Index went up 9 percent overnight on November 8th. With Donald Trump coming into office, the whole industry seems to have breathed a sigh of relief that the status quo—a continuous race toward higher prices—will last for at least a few more years.

The climate in the hospital where I work has been quite different. Subdued depression is the most common reaction, but I’ve seen some doctors cry and others fume about the election. I’ve heard doctors wonder whether their patients will still be able to come see them, or if instead they will lose their insurance through Medicaid and therefore their access to care. I’ve heard patients ask whether their medications are going to become unaffordable and whether they should proceed with elective surgeries now because they may lose their insurance in early 2017.

I did not enter medical school to become an expert on what services insurance will cover, but this is the position I find myself in.

Right now, we can only make guesses about what changes are coming in 2017. Trump’s comments so far on the matter have lacked substance, and it is not totally clear which changes will be legally or politically feasible in the near future. The biotech industry is betting that Trump will stay away from the thorny issue of controlling drug prices (despite his comments during the campaign, and more recently, in favor of price negotiations). On the other hand, my colleagues are betting that he will move quickly to disassemble the healthcare marketplaces and to cut funding to Medicaid—two of the major components of the Affordable Care Act.

Drug companies are happy for the heat on drug prices to be turned down. They seem content to continue the same strategy of following ever larger price increases toward higher sales over the coming four years or longer.

I find drug companies’ complacency extremely shortsighted. Yes, higher prices are a nice way to boost sales for the next earnings report, but public fury about the rising cost of medications is about to bubble over. Already, only 28 percent of people have a favorable view of the pharmaceutical industry, making it the second-lowest rated sector of all, just ahead of the federal government. How long will politicians continue to protect an industry that is so widely disliked by their constituencies?

What’s more, the industry seems to have overlooked that Trump’s policies are likely to lead to people losing insurance, and therefore being unable to afford their prescriptions. Take the new class of expensive hepatitis C drugs. Massachusetts, where I work, is one of ten states with a Medicaid plan that now covers treatment for all members and treats thousands of patients each year. In California, the state Medicaid agency has budgeted $1 billion for these drugs. Will states continue to pay if their federal funding is cut?

Hepatitis C drugs are not the only ones vulnerable to budget cuts. Breakthrough immunotherapy drugs like pembrolizumab are transforming the way we treat cancer, but they cost hundreds of thousands per course and may be hard for Medicaid and other insurers to continue to cover if cuts take effect. New cholesterol-lowering drugs, evolocumab and alirocumab, might prevent heart attacks in people with high cholesterol, but they cost over $14,000 each year and will be an easy target for government insurance cuts.

A few pharma executives seem to understand that the push for higher prices is not a sustainable approach. Brent Saunders, CEO of Allergan, released in September the terms of a “social contract” that includes limitations on price increases and a commitment to serious investments in research. Regeneron’s CEO, Len Schleifer, has recently spoken out against relentless price increases, and Novo Nordisk announced this week plans to limit price increases to single digits.

Still, the momentum in the industry is toward higher and higher drug prices. Most think the Trump administration will facilitate this strategy. Whether or not it will, insiders will have to come to terms with a public that hates them and government agencies that are unlikely to be able to continue indiscriminately funding their therapies. Stock prices should reflect that reality.