BIO: Levin and Maraganore reflect on drug pricing and innovation

Payers need to understand what a new, expensive treatment might mean in terms of rare disorders that require chronic care—if they have treatment options at all. (Alnylam Pharmaceuticals, Ovid Therapeutics)

Last week, Alnylam CEO John Maraganore, passed the torch to Jeremy Levin, CEO of Ovid Therapeutics, to serve as the newly elected chairman of the industry’s trade group, the Biotechnology Innovation Organization (BIO). 

“Reflecting on the last two years, it’s been a remarkable period of time. There’s been no doubt the industry has continued to innovate,” Maraganore told FierceBiotech. 

“I think we’ve managed to preserve, over the last two years, a generally positive innovation environment for the industry. But not without headwinds, of course. The drug pricing debate and so forth,” he said. “I am proud of the fact that we have... been successful at highlighting the core of the issue, at least from our perspective, which was patient out-of-pocket costs... It’s something that wasn’t highlighted as much as it should have been and we were able to bring it forward as one of the key aspects of [drug pricing].” 

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Levin echoed both themes in his June 5 speech at the BIO International Convention. 

“The productivity of our industry has never been greater. We have set the stage to cure preciously intractable diseases... This outpouring of biological and medical innovation is intersecting with the dawn of a revolution in digital medicine,” Levin said. 

But, he said, the biotech industry, “specifically the segment which discovers and develops new medicines, is under threat.”

RELATED: BIO: CEOs weigh in on biotech companies going public earlier and earlier

The consolidation of payer and hospital systems is leading to an “ever-more opaque system of reimbursement” that ultimately passes on increased costs to patients. 

“The payers have now consolidated... they own not just the insurance side, they own distribution. They own the logistics. And they own the [pharmacy benefits managers]. They’ve all bought themselves out, so today, you have a handful of companies that control 140 million American lives,” he said. 

“At the same time, hospitals are consolidating left, right and center. What do they do when they consolidate? Where are their targets?” 

With hospitals dispensing oral drugs out of their own pharmacies and administering infusion-based medicines through their own infusion centers, “this consolidation is shifting who is controlling who gets these medicines and how much they pay for it... That’s an enormously important thing to focus on,” Levin said. 

Consolidation aside, another hurdle in drug pricing is understanding. We now live in the age of cell therapy, gene therapy and gene editing, where treatment may cost hundreds of thousands—or even millions—of dollars but could be a one-time shot that ends up being cheaper than chronic care. 

Take Zolgensma, Novartis’ new gene therapy for spinal muscular atrophy (SMA) that has a sticker price of $2.1 million—a figure that dropped not a few jaws. 

“I think people should really reflect on what the treatment means,” Maraganore said. “Look at Zolgensma. It is potentially curative for kids born with SMA, which is a leading cause of infant mortality from genetic causes in the U.S. It could take a kid who is born with this terrible disease whose normal course is to die a miserable death—it could allow that kid to live. 

“It’s too soon to say how ‘normal’ of a life over time that child would live, but it’s at least closer to a normal life than they would have had before.” 

“The fascination with the price is it’s a big number, a huge number. But when you take a step back and put it into the context of value, is the cost of caring for this child, who is disabled over five to six years of life, is the burden of that child’s death on your life—is it worth that money? No doubt it’s worth that money. Economically, emotionally, socially, it can be justified.” 

What the pricing issue is really about, Maraganore said, is insurance, both private and government-run. 

“That’s their job,” he said. 

“When you put it all together and think about the patient impact of a drug like Zolgensma... this is what insurers, government and healthcare are meant to do. To have a system that can reward innovation as it needs to be rewarded while making sure we have no economic burden on patients and their families,” he said. “And the rest of us paying premiums or tax dollars to commercial insurers or governments are going to do what we have to do as members of society to secure our own protection and the protection of others when catastrophes occur.” 

Payers need to understand what a new, expensive treatment might mean in terms of rare disorders that require chronic care—if they have treatment options at all. 

“We have to have a partnership with payers who understand... if you’re able to ameliorate a disorder and truly cure it, then you will dramatically reduce the cost to [the payers], and they should therefore be supportive,” Levin said. 

That said, there’s much work ahead to unite different groups—payers, patients, their families, the voting public—to come to this understanding that innovation must be paid for, and in a logical and economically viable way. 

"There’s a consequence to not having understanding. The consequence is you have ill-advised bills [in state assemblies and Congress] which will attack the system and diminish the ability to find new medicines.”

RELATED: Novartis slaps $2M-plus price tag on newly approved gene therapy Zolgensma—and cost watchdogs approve

Drug pricing, at the end of the day, is part of the cycle of innovation. 

“You price for value, you allow that to grow, you get to every patient, you make sure they get the access for it. And once you’ve done that, you make sure that you reinvest in new and novel therapies,” he said. “And, at some stage, that revenue from the older product, as it gets older, needs to stop. We have a patent system for that, you can’t have perpetual franchises.," Levin said.

Maraganore made the same point about drugs getting older. 

“One thing that’s always forgotten here is, if these medicines get created over time, there will be more of them competing with each other. There will be generics. Medicines get cheaper and cheaper. When this happens, they go on ad infinitum, for the rest of the world’s time, as a cheap medicine,” he said. 

“For the relatively short duration of somebody’s life, our lives, typically 10 to 15 years, there is a high price. That’s the price used to reward the innovator. For the rest of eternity, for as long as our world survives, those medicines are essentially free,” Maraganore said. 

To put it in perspective, if we, as a society are unwilling to pay for those medicines today, they won’t get invented. We would be denying our children and grandchildren the opportunity to benefit from that innovation, he said. 

“It’s an important cycle we need to keep in mind as we reflect on the price of a drug."

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