Drug Pricing: An Industry Perspective
An Interview with Biogen’s Chief Strategy Officer, Adam M. Koppel, M.D., Ph.D.
Since the advent of biosynthetic insulin in the 1980s, tremendous advances in science have given rise to biologic medicines that have dramatically improved both options and outcomes for patients. Yet, as the focus of the healthcare industry has shifted to cost containment and comparative value, the pricing of these novel medicines has come under widespread scrutiny. Today, Pulse catches up with the Chief Strategy Officer of Biogen, Dr. Adam Koppel, to gather the perspective of an industry veteran.
PULSE: I’d like to dive right into the topic of the interview, drug pricing. Why do you think pricing has become such a hot topic in the news today?
DR. KOPPEL: It’s been in the news a lot, unfortunately, because there have been some high profile, inappropriate examples of price increases. What is often overlooked is that in recent years there have been truly innovative and even curative new drugs developed that have impacted millions of patients across numerous indications – hepatitis C, multiple sclerosis, cancer, diabetes, among many others.
PULSE: Many drugs and drug companies have come under fire for how they have priced these innovations. Do you think this debate is warranted?
DR. KOPPEL: Debate is always warranted, but there should be a balanced set of arguments on both sides. There are certainly examples where there may be price increases that seem a bit extraordinary. But on the whole, drugs and therapeutics have grown in line with overall healthcare spend. In 2014 and 2015 there was a spike but that was due to a record number of approvals for new therapies – mostly due to new drugs in hepatitis C and in oncology that brought huge value to providers, patients, and families. It’s not out of nowhere that prices went up, it’s that significant, innovative products came to market that had a large impact on patients. So in many respects, the discussion is good. It brings positive attention to the impact that innovation is having on patients – and it is important to remember that one day these new innovations will lose their patent protection, and if the market is working correctly, their prices will decline significantly. So the high prices have a limited window.
PULSE: Often times drug prices that are quoted in news publications are not the prices that are actually paid by insurers, which brings to light some of the complexities of the drug supply chain. How does this factor into the broader discussion around drug pricing?
DR. KOPPEL: So the concept that’s used is called list price which advances at a certain clip, and that rate is different for different drugs ranging anywhere from 3% a year in some categories to 10% or more in others. Companies do not realize 100% of those price increases due to rebates, discounts, and other concessions. So in reality, the price increases are much less than what you might see reported. The interesting thing to discuss here is the implication this has on other channel partners involved in the process and what may impact a physician deciding that a patient needs a drug and that patient actually getting the drug. This is the ecosystem of pharmacy benefit managers, payers, specialty pharmacies, and other stakeholders. One thing to realize is that when you see the difference between a net and a gross price increase, some of that goes to supporting those channel partners.
PULSE: Do you think physicians are aware of the prices of the drugs they prescribe?
DR. KOPPEL: It’s very dependent on the therapeutic area. In oncology, yes, they are becoming more aware. In primary care areas, probably less so. My experience has been that most physicians, even if they think they’re aware, don’t understand the full rationale behind drug pricing. Probably, although they may speak to it, I also don’t believe that most physicians use drug pricing as a driver for their decision making of what drug to use. The most important thing for pharmaceutical companies is to ensure patients have access to therapies, and we are committed to patient assistance programs that help do that. Last year, we provided over $1 billion to assist patients.
PULSE: What about impact on patients – do you think they are feeling higher therapy costs?
DR. KOPPEL: There are certainly some important examples, especially for uninsured or under-insured families. The increase in copays and the changes in the way insurance covers drugs is certainly a part of what’s driving increased attention to drug pricing. Patients are feeling the costs more.
PULSE: How do you think comparative effectiveness and value-based medicine will affect drug developers in the near future?
DR. KOPPEL: I think that it will change the behavior of the drug companies developing the drugs. If there’s drug X that already exists for a particular indication and they are developing a drug for that indication, they’ll say “well this is what we need to show if we want to charge a particular price, because there’s other options already on the market. We better ensure that we show value for the price we want to charge.” So drug companies will have to prospectively think about and design clinical trials such that they’ll be able to show that value. They may be able to do it during their label-enabling clinical studies, or they may be able to get that data via “real world data” or the data that’s collected while their drug is approved and on the market and is being used by a larger subset of the community.
PULSE: What are your thoughts on biosimilars in reference to the topics we’ve been discussing and how is Biogen thinking about this topic?
DR. KOPPEL: I’m glad you asked that question. At Biogen, we have a joint venture with Samsung called Samsung Bioepis where we are leveraging our expertise in manufacturing and technical drug development. We will also commercialize these biosimilars in Europe. There are several biologics we are now developing in the anti-TNF space, and recently our first etanercept biosimilar referencing Enbrel, named Benepali, was approved in the EU. Biogen is an innovation company like most biotech companies, and innovation companies ought to be protected through the patent system for their innovations, because they’ve spent a lot of money to identify insights and turn them into practical and safe and efficacious drugs for society. That being said, after a certain period of time, there should be an opportunity for lowering the price of these drugs through biosimilar pathway.
PULSE: We’ve touched on a lot of topics during this discussion. For our last question, what thoughts do you have for the industry going forward?
DR. KOPPEL: The debate needs to shift from the price of these therapeutics, to the value that they are bringing to patients, prescribing physicians, families, and to society. We didn’t talk about dementia, which is an area Biogen is moving into, but when we think about developing drugs for dementia and particularly dementia of the Alzheimer’s type, the impact of this disease not just on the patient but on society on a whole is tremendous. So for us, we think about if we are able to find solutions to reverse or slow the progression of these terrible dementias, the impact on society of doing that is great and it needs to be considered that way.
Adam Koppel, M.D., Ph.D.
Executive Vice President of Corporate Development & Strategy and the Chief Strategy Officer at Biogen
Adam Koppel, M.D., Ph.D., is an Executive Vice President of Corporate Development & Strategy and the Chief Strategy Officer of Biogen, responsible for leading corporate strategy and portfolio management, and has served in this position since November 2015. Mr. Koppel joined Biogen in May 2014 as Senior Vice President and Chief Strategy Officer. Previously, Dr. Koppel was a Managing Director of Brookside Capital, the public-equity affiliate of Bain Capital. Prior to Brookside Capital, he served as Associate Principal with McKinsey & Company, where he consulted to companies in the pharmaceutical and biotechnology industries. Dr. Koppel has served as a member of PTC’s Board of Directors since March 2013 and also serves on the Board of Directors of Trevena, Inc. Dr. Koppel received an M.D. and Ph.D. from the University of Pennsylvania School of Medicine, an M.B.A. from the Wharton School of the University of Pennsylvania and a B.A. from Harvard University.