Pricing pressure: Doubling down on the political drama

With all the brouhaha over Martin Shkreli's 5000%-plus price hike on an obscure treatment, it's important to remember what got us started on this journey on drug pricing and where we're left now that Shkreli has much bigger fish to fry with his attorneys.

Gilead ($GILD) started this mainstream controversy with an $84,000 price tag for Sovaldi, Valeant ($VRX) more than kept the pot brewing with its own buy big, price high, shun R&D strategy, and much of the rest of the pharma industry doesn't at all like the fresh scrutiny that routine price inflation on old drugs is gaining.

Yes, drugs are a relatively small part of the healthcare dollar. But don't expect that to win any arguments in Washington D.C. You don't need to be big to be treated like a giant threat. Shkreli was a bit player who got super villain billing over the price of one drug. Price gouging is a lightning rod issue in a presidential election year, and the public just woke up to the fact that there's nothing in the law to stop it.


It's hard to see how such a dysfunctional Congress could actually get its act together in 2016, which is a breather that the industry badly needs to take advantage of. Truth is, drugs like Sovaldi mark an amazing advance in the way disease is treated. Gilead came up with a painless cure for hep C--at considerable cost--and had some of the biggest companies in the industry race after them with rival drugs.

That's a virtuous model and it's well worth the enormous payoff that Gilead has earned. True innovation has to be rewarded or we will destroy a multibillion-dollar business with incredible potential for improving medicine. And if you kill the profits, you will kill the academic/industry research ecosystem at its base.

Unfortunately, it was left to Gilead to explain it. And while that biotech has a brilliant track record in R&D and business growth and rewarding investors, it gets an 'F' for the way it presents itself to the public. They make good look bad and clearly couldn't care less. So now it's up to the industry as a whole.

Lawmakers need to be both nuanced and practical in discussing a real response to the pricing issue. That's a tall order, but for the biopharma industry to simply grandstand on the vow that the only thing biopharma cares about is helping patients is a losing proposition--especially when the average pharma company is charging ever higher prices for ever older drugs. That's the industry pricing model, and it's no longer a dirty little secret. It tempts an overreaction.

Instead, we have to learn how to demonstrate what innovation is all about, not just claim it as an excuse for all things. Lawmakers need to reward innovation and penalize profiteering. And they can start by identifying the difference between the two. -- John Carroll