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Yesterday, I mentioned that we officially have a new trend: big pharma companies walking away from pricing-transparency reports, which generally detail list-price changes, net-price changes, and the size of the rebates and discounts that drive the gap between list and net prices.
I posited that there were three reasons why that trend may be taking hold: ESG fatigue, better-educated stakeholders, and the time/complexity of pulling the numbers.
But there are reasons why abandoning these kinds of efforts may be folly. Here are the three that are top of mind for me.
Pricing transparency is (still) having a moment. If the Trump administration has one consistent set of beliefs about health care, it’s that transparency is foundational. Yes, the transparency focus has been mostly on hospitals (not without good reason!), but it sure seems like voluntary efforts to show good corporate hygiene around transparency isn’t a bad idea.
The list-to-net bubble (still) needs explaining. Pharma has come an amazing distance in explaining all of the ways that value is captured by various parts of the drug supply chain, but we still have a ways to go.
Transparency reports are a great way to illustrate these key concepts to advocates and policymakers at the state and federal levels, and smart companies are using this kind of data to help make clear otherwise-tricky concepts. (As an example: J&J has done a nice job of wrapping in 340B commentary into its annual effort.)
“Price” shouldn’t be a dirty word. Pharma can and should be willing to defend the prices of its products and explain the value that they deliver, lest someone else fill that void. Much like the disclosure of launch prices, pricing-transparecy reports send a signal that pricing is not a place where industry has something to hide.
All three of these reasons, at their core, are about reputation. It is an objective fact that pharmaceutical companies are struggling with reputation right now, and it would require a whole other publication to unpack all of the factors there.
My basic thesis on the reputation of the industry is that what turns people off is not that there isn’t enough innovation. Most Americans are appropriately awed by what the industry produces (figure 2, here). What people hate is the business model (or, more accurately, what people think the business model is).
So drug companies can and should be looking for low-cost, low-risk ways to show patients and policymakers that they’re doing the right thing, that pricing can be explained, that the system is shot through with perverse incentives, that the blame and attention should be spread out more thoughtfully.
Pricing-transparency reports are one way of making those points. Like everything else, transparency moves on a pendulum. Here’s hoping it starts to swing back.
***
There is another counter-example that I need to talk about. GSK continues to push out these numbers as part of its broader ESG-reporting initiative. The company’s Responsible Business Performance Report breaks down the key numbers across the portfolio:
Net price change: +5.2%
List price change: +1.5%
GSK also reports out five-year trends.
What’s admirable here is that GSK could have looked at the numbers, thrown up its hands, and said, “Eh … this complicates the story. Let’s deep-six the effort.” Instead, they published the numbers. And, indeed, the numbers do tell a slightly different story than the one we’re used to, one that emphasizes GSK’s unique product mix.
Credit to the company for staying the course, even if they did rename the report (which was the “ESG Performance Report” last year).
The Trump administration has apparently fired a bunch of the lawyers working on IRA cases. I’m not sure you can read anything into that. Intentionality has not been a hallmark of the mass firings.
It’s not a firing, but Endpoints has the scoop on a key member of the CMS team overseeing rebates and negotiations — John Coster — getting out the government.
There is a clear trend of people trying to build support for policy reforms by pointing out that Elon Musk is on the other side of the issue. Here is Alexandria Ocasio-Cortez putting last year’s derailment of broadly supported PBM reform at the feet of Musk. And here’s an Endpoints piece in which a family struggling with a rare disease makes clear that they see Musk as the key reason why the pediatric disease priority review program didn’t get renewed.
This morning, it’s white papers, all the way down. This Information Technology & Innovation Foundation effort makes the case that the IRA needs to be reformed because it’s already hampering small-molecule innovation. This Cencora assessment looks to history, detailing how past pro-innovation policies can be a blueprint for reversing the IRA’s damage. And Optum has an “e-book” (whatever that is) on the past quarter-century of pharmacy benefit management. There is some ridiculousness here and there, but I liked this one line: “Utilization, not price, is the leading driver of specialty spending.”
Here’s a Real Clear piece from Ken Thorpe, chair of Partnership to Fight Chronic Disease. It touches a lot of basis, blaming the PBMs for high drug prices and pressing for IRA reforms, notably the EPIC Act.
Cost Curve is produced by Reid Strategic, a consultancy that helps companies and organizations in life sciences communicate more clearly and more loudly about issues of value, access, and pricing. We offer a range of services, from strategic planning to tactical execution, designed to shatter the complexity that hampers constructive conversations.
To learn more about how Reid Strategic can help you, email Brian Reid at brian@reidstrategic.com.
