As Democrats called for government measures to
cut drug prices during the presidential debate on Tuesday night, the
pharmaceutical industry was making the case at a conference in San Francisco
that it can fix the problem itself.
The case, made obliquely and directly in news
releases and interviews, includes half-priced insulin offered by the
drugmaker Eli Lilly (ticker:
LLY), and the launch of a much-discussed startup backed
with $200 million in venture capital. Pharmaceutical executives largely agreed
that patients pay too much for drugs, but argued that insurance-plan design was
a big part of the problem.
“The system has just evolved like a tree
that’s grown without being pruned,” said Mike Mason, a senior
vice president at Lilly and president of Lilly Diabetes. “You wouldn’t design a
system that says if you have a chronic disease, I’m going to make you pay a lot
out of pocket so you may decide not to stay on your medication. That’s not good
health-plan design.”
As new polls show Sen. Bernie Sanders with a
shot at winning the first presidential primary contest in Iowa on Feb. 3,
pharmaceutical, biotechnology, and other health care executives and investors
are in San Francisco for the annual J.P. Morgan Healthcare conference, a major
industry gathering. While biotech stocks dipped on the first day of the
conference after no major deals emerged, they generally rose on
Tuesday. The SPDR S&P Biotech ETF (XBI)
ending the day up 2.9%.
During the Democratic primary debate on
Tuesday evening, candidates assailed the pharmaceutical industry, and offered
their own plans to cut drug prices. Sen. Elizabeth Warren said she would “lower
the price of insulin” on her first day in office, and then have the government
manufacture its own prescription drugs to compete with private
prescription-drug makers.
Sanders, for his part, blamed high
prescription drug prices on “the greed and corruption of the drug companies and
the insurance companies,” and said his Medicare for All plan “takes on the
pharmaceutical industry.”
By the end of the second day of the
conference, meanwhile, industry efforts to control drug prices had emerged as a
major theme. (Prices in the conference hotel were decidedly not controlled. In
the lobby cafe, bananas were going for $2.75 each.)
On Tuesday, Lilly announced an
extension of its line of generic versions of its top-selling insulin product,
called Humalog. The new products are part of an effort to reduce costs for
people on government health plans. The company said that more than 95% of
people on Humalog pay less than $100 a month for the drug.
Lilly faced criticism in December for its implementation
of the generic insulin program. Warren and fellow senator Richard Blumenthal said that the
generic was not widely available. Mason, in an interview Tuesday,
pushed back on that claim, saying it was up to pharmacies whether or not to
stock a particular drug.
“Any pharmacy can order it,” Mason said.
At a conference panel on Tuesday, Lilly’s
CEO, David Ricks, said that the company would like more of
its “partners in the supply chain” to list and carry the generic insulin
products.
“Ultimately, reform to the insurance system,
so we avoid these upside-down economics for patients,” Ricks said. “And I think
more transparency throughout the drug pricing system are the path forward, and
we’re for both those things. And we’ll try to be a constructive partner with
everyone else who comes to this conference to try to solve those problems.”
The conversation echoed some of the talk
around EQRx, a $200 million venture-backed startup, announced early in
the conference, that aims to develop so-called fast follower drugs that would
work just like top-selling drugs, but hit the market at a third of the price.
The company’s funders described it as a market-based response to drug-price
concerns.
“I think we’re all anticipating that if we
don’t do something in a market-based fashion, it’s going to be done to us in a
regulatory fashion,” Krishna Yeshwant, a
general partner at the venture-capital fund GV, which is backing EQRx,
told Barron’s before the launch.
At the conference, pharmaceutical and biotech
executives were critical of various insurance schemes, but protective of the
ability to set prices for drugs.
“I don’t understand why there is a copay for
patients with cancer,” said Herve Hoppenot, CEO
of Incyte (INCY), a
biotech firm that sells Jakafi, which treats a number of rare diseases. But
Hoppenot criticized the international pricing index model, a Trump
administration proposal that could link drug prices paid by government programs
in the U.S. to prices around the world.
“Then you have the completely bizarre idea of
using prices from other parts of thee world, in different currencies,” Hoppenot
said. “That part, I think, is really something that we as an industry would
consider is going to have a very large and detrimental effect on the
willingness to invest over the long term to get innovation.”
Major companies presenting Wednesday
include AbbVie (ABBV), Mylan (MYL), and Walgreens Boots Alliance (WBA).
Many are likely to face questions about pricing after the debate Tuesday night.
The XBI was 3.8% higher as the market opened
Wednesday.
Write to Josh Nathan-Kazis at josh.nathan-kazis@barrons.com
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