Monday, February 22, 2016

Remarks, From Back In January 2016: CEO Frazier, On Undoing Damage Shkreli And Pearson Did -- To Old-Line Pharma Pricing Model

Overnight, my buddy Pete Loftus at the Wall Street Journal is running excerpts from an interview he did back in late January with CEO Kenneth C. Frazier -- from the same set that generated stories about Merck's ability to do -- and appetite for -- "multi-billion dollar bolt ons", in the life sciences M&A sphere in 2016.

But the focus of these Loftus-curated quotes is on. . . you guessed it: pricing. Specifically, it is clear that the remarks were (in part) made in Mr. Fraizer's role as Chairman of PhRMA. And it is clear that they reflect discomfort with the over the top pricing strategies of Valeant, and a deep dislike for Mr. Shkreli (from prior on the record remarks). Back in January, Kenilworth was being lumped in with Micheal Pearson's Valeant -- as a serial price raiser, and on old drugs, to boot (by various MSM outlets).

While there is some data (to be sure) to support that argument, as to Merck, most of the highest prices quoted by Kenilworth are for truly revolutionary new drugs, like Keytruda, for cancers (as the interview makes plain). Even so -- I mark the interview, and encourage all to read it, because we see there, for the first time, a shift in the rhetoric. The rhetorical shift is to an affirmance of pricing tied to "real world value creation" -- or said another way, to meaningful in practice, real outcomes improvement. Less important then, henceforth, will be the simple p-value of a study on an old drug (think here of the recent ding at FDA -- denying Kenilworth an expanded label from IMPROVE-IT), in allowing an uptick on pricing, at the formulary.

So this is indeed a new world. And as my post of yesterday indicated, the reality of Medicaid expansion, post the ACA of 2010, will be (on balance) a boon for companies like Merck (if the remaining 17 or so states will allow their neediest citizens access to it). I personally believe that Mr. Friazier is less creating a new pricing model, and more echoing what will be the new reality, as government and insurance payers and benefit managers cut back on the excesses driven by Mr. Pearson's tenure at Valeant (Valeant is tanking anew, on more concerns about the viability of its merger accounting tricks, this morning), and Mr. Shkreli's fleeting 15 minutes of ignomy -- at Turning and KaloBios. Do read the whole thing -- but here is a bit:

. . .[I] think there’s a challenge we have in the industry with respect to pricing and annual price increases that we’re going to have to think through. We’re going to have to find new and better ways to link what we charge for the drug to the value that it actually creates in the marketplace. . . .

I am pleased that there are thoughtful, responsible adults involved in this discussion, from the old-line pharma side of the table, nationally (and by that I mean not just the tantrum-throwing Mr. Read, at Pfizer). So, welcome to a sunny, temperate Monday in the city of big shoulders. Smiling ear to ear here, post "Deadpool" silliness, last evening. . .

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