Pharma CEOs Should Take A Stand On Egregious Price Increase -- But They Won't


[This post originally appeared on Forbes.com on September 20, 2015.]

The latest uproar over rapacious drug pricing centers on a wily biotech, Turing Pharmaceuticals, that acquired the rights to an anti-infective medicine used in immune-compromised patients, then hiked the price by more than 50-fold.

Let’s set aside for a moment the questions of whether this is legal (probably) or good for the company’s short-term bottom line (ditto). And, let’s leave it to others to parse CEO Martin Shkreli’s claim on Twitter that Turing’s move “benefits all of [the company’s] stakeholders.”

Instead, let’s focus on what the Turing case represents for pharma companies: an opportunity to take an unambiguously pro-patient position in a drug pricing debate — and one that they will almost certainly bobble.

First, let me clarify that pharma execs haven't been anti-patient on drug pricing — it’s just that their engagement so far has been somewhat … well, academic. Industry representatives have focused on whether drugs deliver “value,” how to measure it, how much it’s worth, and whether we risk imperiling the entire drug R&D ecosystem if we don’t pay appropriately for it — but although these are important questions, they’re complicated and abstract, and unlikely to resonate with the average American.

But a 50-fold boost in the price of a prescription drug? That will sure as heck resonate — especially in the upcoming election cycle, with the soaring price of medicines already in the media's crosshairs. And the risk to all pharma companies is that this could become a story not about a single biotech, but about the industry as a whole and its insensitive, unethical pricing practices.

Sadly, most pharma CEOs will likely perceive that taking a stand would lead to an even greater (personal) risk – that they’ll lose their jobs. GSK’s Andrew Witty made bold changes to GSK’s sales force compensation and data transparency practices, but they don’t seem to be protecting him from calls for change at the top. The clear message to the pharma C-suite is that there’s little earthly reward for taking a stand on ethical issues. Focus on profits, not principles.

Other industry leaders will likely argue (as I’m sure Shkreli will in the coming days) that pharma CEOs should stay mum — not out of self-interest, but because price increases like Turing’s are actually pro-patient and pro-innovation. Here’s one way the case might be made: The ailment in question (toxoplasmosis) is a niche market where it’s hard to make money, which is why there hasn’t been much R&D activity or investor interest. Turing will use the extra proceeds from the price increase to fund further R&D in this neglected disease area, which is good for patients and the overall pharma innovation ecosystem. And anyway, Turing’s price hike won’t affect patients very much, only those nasty insurance providers. Win-win-win!

This argument may or may not withstand close scrutiny, but that’s beside the point: the real issue is that it sounds like the same baroque logic that the pharma industry has used in its defense in the past, with poor results. Lavish gifts to physicians and “ghostwriting” were both defensible on legal and business grounds as well — but by supporting (or, by their silence, failing to condemn) the most egregious outliers until far too late, pharma companies found themselves on the defensive even in cases that should be deemed ethically appropriate, like paying market-rate compensation to physician consultants or providing expert writing assistance (with proper acknowledgement) to academics who request it.

We’ve seen this movie before — and we’re about to see it again, this time in drug pricing. Although Turing’s hefty hike may fail the red-faced test, no bright line divides it from what has become standard industry practice: annual double-digit percentage price increases on marketed drugs, year after year. Yes, 15% is less than 5,000% — but they both lie on a spectrum, and if pharma’s dismal approval rating continues to lie just below that of insurance companies, it’s hard to imagine much public sympathy materializing when companies try to explain the difference.

Pharma execs probably won't step into the fray because they believe that critiquing extreme price hikes like Turing’s will make their own practices more vulnerable to scrutiny — but that view is horribly misguided, because the horse has already left the stable. The question with regard to annual drug price increases isn’t whether pharma’s annual price hikes will be questioned, but when new regulations or business practices will emerge to rein them in. And if any pharma execs want to have a seat at the table when that happens, their best chance is to take a principled stand against the most egregious excesses, and try to establish themselves as credible partners in defining the new shape of the drug pricing landscape. I'm not holding my breath.