60 Minutes has just produced a piece that is a must watch for anyone in the industry. And where is big pharma?
The details of the story are familiar. 60 Minutes caught up with two doctors who in 2012 told drug makers, “enough.”
In October of 2012, these doctors wrote an op-ed in the New York Times explaining why their hospital, Memorial Sloan Kettering, would not cover one of the new cancer drugs, Zaltrap. Their reasoning was straightforward:
“The drug, Zaltrap, has proved to be no better than a similar medicine we already have for advanced colorectal cancer, while its price - at $11,063 on average for a month of treatment - is more that twice as high,” they wrote
Drug pricing has been a hot topic this year with much of the pressure being put on Gilead for their breakthrough HCV drug, Sovaldi.
But yesterday's 60 Minutes piece put the focus back on Sanofi, the company that makes Zaltrap. They tell the story that after Dr.'s Salz and Bach wrote their op-ed in the New York Times, Sanofi actually dropped the price of Zaltrap by half. But not to the patients, the doctors explain to the reporter, Leslie Stahl. Rather than drop the price across the board, Sanofi made a special deal for doctors who would get the difference in kickbacks for prescribing the drug. This works because Medicare and the other insurance companies are still billed at the original price of $11K.
OK, so that's the story of two doctors. How about the other side that we expect from a program like 60 Minutes?
Unfortunately, no one from Sanofi would talk to the news program about why Zaltrap was twice as expensive as Avastin for the same indication, or why Sanofi made the deal with doctors rather than pass the savings to patients. Novartis, too, will not comment about Gleevec and why its price has tripled since 2001 from $24K to $93K. The only one to defend pharma to 60 Minutes is John Castellani, the CEO of the industry group, PhRMA. And he gets a bit trapped up.
“I can’t comment on specific drugs,” he dead pans.
After a popular journalism piece like this, the image of pharma in the eyes of the American people is likely to get only worse, if it could. Which is sad. These are life extending drugs, and they are created by some of the greatest heroes of our time.
The piece also brings to light something that perhaps most Americans don't know: Medicare cannot negotiate pricing, by law. Payers have to pay whatever price the drug companies come up with. This is in stark contrast to other countries who, able to negotiate, are paying 50 - 80% less than Americans.
So why can't Medicare negoiate? It does seem strange that the country which champions capitalism like we do has our hands tied when it comes to negotiating drug prices.
Where was the representative from Medicare explaining this?
Our American insurance system is complicated for sure. In truth, it is unsustainable, including Medicare. Obamacare didn’t come close to fixing it. The Brits and the Germans negotiate, and determine whether a drug is worth it at a goverment level. But in America this negotiation is seen as unethical. If there’s a drug that will help, then surely it should be covered, no matter the cost.
We in the industry are all too familiar with the high cost of drug development. But as Matt Herper over at Forbes writes, industry leaders now carry the onus of explaining why a company like Sanofi can drop the price of a drug by half when the original price was supposedly set based on the development costs.
The Zaltrap vs Avastin case is one of the more simple. But with widespread media coverage, this simple case could set a precedent and embolden other hospitals, insurance carriers, and perhaps even lawmakers to end the system of pay whatever the drug makers ask.
Interestingly, the drug companies mentioned in the piece, Sanofi, Novartis, and Roche are all European companies benefiting from our American system of pay whatever the drug companies ask.
Will our system change? Should there be an American government agency whose job is to negotiate pricing like Germany and the U.K. have? Or is it part of the success of our system, that because we don’t have a government agency bargaining, it’s left to the patients and doctors to ask on their own, is this drug worth it?
60 Minutes has delivered a powerful punch here. We'll get some folks to the program to reply.