King of BIO: The Chairwoman of Biotech’s Top Trade Org Talks Policy

6/25/14Follow @alexlash

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coming to the fore now. And we have increasing responsibility to make the value case for our drugs, which I think each company will have to do. But for everything else that we buy, price is a factor. So it also makes sense that price would also be a factor in how people make buying decisions for drugs. It highlights the importance of what we need to do as an industry to make the value case for our drugs.

X: So BIO isn’t necessarily going to bat for Gilead to help them make their case.

RK: BIO isn’t involved in the pricing decisions of any of our companies. We are interested in the general question of how to define and communicate the value of our products.

X: But when Gilead doesn’t make a good case—although it seems it might have one—it hurts the whole industry. This is no longer a Gilead problem, this is a biopharma problem.

RK: There’s a lot going on in the marketplace. Under some insurance plans drugs covered in the “specialty tier,” patients have to pay and are put at the greatest disadvantage. Their insurance isn’t specifically covering it.

There are a number of issues focusing on the question of pricing. ASCO has an initiative looking at safety and toxicity and efficacy and pricing, in terms of trying to evaluate certain oncology drugs. I think it’s fair for price to be considered as part of the value equation.

X: Is it time to let Medicare negotiate drug prices?

RK: The challenge is that it’s effectively a single payer. It’s kind of like saying there’s one buyer for your house, and you’re trying to sell. Now negotiate the price. If there’s only one buyer it’s really not a market negotiation.

X: Couldn’t you say the same thing about any large insurer?

RK: There are multiple insurers in the market. Multiple players and multiple drugs, and all these forces will ultimately come up with some set of prices and uses of drugs. Better to have that negotiated in the marketplace that have a single payer setting the price. That could lead to price controls, which always disincentivize innovation.

X: So you’re saying that consumers who can use private insurers have a choice, but someone on Medicare only has Medicare. Therefore Medicare is a single payer and the others are not?

RK: Yes. And in the case of Medicare: if you [are a drug company with a] drug that’s used by people who are generally Medicare age and eligible, you may end up with a single payer for your drug.

X: Are your emerging company constituents concerned about the state of early stage venture and financing? In the past it’s driven a lot of innovation in biotech. And for even earlier research, we’re not seeing an expansion of NIH money any time soon. Is there an early stage biotech problem?

RK: There is certainly going to be tweaking of the model. That’s always going to happen. I think the success of the public markets and the numbers of companies getting out in the past year will incentivize some expansion of the venture investing.

X: Any evidence of that yet?

RK: I haven’t seen the latest numbers. I would expect we’d see increased venture investing because of the IPO market. But it might not get back to the level it was. At one point it was certainly much easier to fund earlier stage work. That said, I think the industry is more sophisticated than we were 15 years ago. It’s filled with people who have grown up in the industry with experience developing drugs. There are experienced management teams and experienced investors.

Alex Lash is Xconomy's National Biotech Editor. He is based in San Francisco. Follow @alexlash

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  • Indy Vt

    The N.I.H. gives 30 Billion dollars annually of YOUR
    taxpayer dollars to medical research, which is good,
    BUT, only the Pharmaceutical companies profit.
    Now, for example, if you worked for IBM and you
    invented something while you were on their payroll,
    that would be “work made for hire” and they
    would own the Patent; therefore, under Patent Law,
    We, the People, should OWN at LEAST 50% of the
    Patents on all prescription drugs and medical
    devices where taxpayer dollars paid for the reasearch,
    design and development! 2014 vote for political
    candidate Cris Ericson for U.S. Congress.
    Get your money’s worth out of government!
    Support Cris Ericson for United States Congress 2014.
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  • Dan Eramian

    Good questions from Xconomy, very good answers from Rachel. Biotechnology used to be a story topic of “hope and miracle” drugs. Perhaps a too optimistic picture. But the parade of high drug prices has shifted that story topic from miracles to reimbursement issues. The battle has been lost in Europe where governments set prices and limit access to drugs. We need to find a middle-ground and retrumpet that value message..

  • Mona Ali