Even though the Trump administration is filling up with officials who appear to be friendly to the biopharmaceutical industry — such as Scott Gottlieb at the Food and Drug Administration and Alex Azar, whose nomination to lead Health and Human Services is pending before the Senate — that circumstance is unlikely to cure the sector's image problem, CEOs from some of the top drug companies acknowledged.
The industry's public reputation is not where it ought to be, given it is a sector that innovates to save lives, Merck & Co. Inc. Chairman and CEO Kenneth Frazier said Nov. 30 during a late-afternoon panel discussion at the Forbes Health Summit in New York.
While the CEOs on the panel blamed a small number of companies that have significantly hiked their prices or engaged in other activities that tainted the public's perception of the industry, the responsibility for improving that negative image rests with the sector at large, said Leonard Schleifer, president and CEO of Regeneron Pharmaceuticals Inc.
"I think we have to clean up ourselves a little bit, lest we have the government clean it up for us," Schleifer said.
But Brent Saunders, chairman, president and CEO at Allergan plc, took issue with drugmakers debating in public certain tactics companies use to prevent competition, insisting such disagreements would wind up in headlines that would further sully the industry's image.
"There's a lot of people in this room. Every quote you just said and is tweeted out is going to be on various news sources, and if you think that's helping the industry image, I think you're naïve about it," Saunders told Schleifer.
The squabble between the two biopharmaceutical chiefs erupted at the Forbes summit when Schleifer said he thought Allergan's recent maneuvering to block generic competition of the company's eye medicine Restasis through the use of a Native American tribe's sovereign immunity was "nuts."
In September, Allergan agreed to pay the St. Regis Mohawk Tribe $13.8 million up front to take ownership of six patents covering Restasis — one of the drugmaker's biggest moneymakers, second only to Botox — plus another potential $15 million annually in royalties.
The tribe then filed a motion with the U.S. Patent and Trademark Office's Patent Trial and Appeal Board seeking to escape from inter partes reviews, or IPRs, by claiming sovereign immunity. The IPRs are trial proceedings created under the 2011 America Invents Act intended to be a faster and more affordable alternative to challenging patents in the courts.
The IPR system is being challenged at a case before the Supreme Court, which heard oral arguments Nov. 27.
"Frankly, I think it makes your company look bad," Schleifer told Saunders about Allergan's St. Regis deal. "It makes it look desperate to circumvent our system by licensing something … trying to rent out sovereign immunity. I think it would be better time spent trying to make some new drugs."
America's Founding Fathers put a time limit on patents for a reason — to spur innovation, Schleifer said.
The St. Regis transaction not only was an abuse of the U.S. patent system, but it violated Allergan's own "social contract," in which it vowed to ensure its branded therapeutics would be accessible and affordable for patients, he said.
"I respect you, but I can't accept you want to be a leader of the industry and you want to put out a social contract saying you won't raise drug prices more than 10%. You raised a lot of them by 9.9%," Schleifer told Saunders. "You want to talk about innovation and you're trying to get around a system that's intended to not have patents that are not valid be in place. I don't think that's good."
But the Allergan chief argued the IPR system was "flawed," and blamed it for contributing to the drop from first to 10th of America's standing in the world in the number of patents held and for the fall from sixth to ninth in competitiveness.
"IPRs have created a tribunal undermining intellectual property," Saunders said.
He said that when Congress established the IPR system in 2011, it created a double jeopardy situation for patents held by biopharmaceutical innovators. The sector already faced patent challenges under the 1984 Hatch-Waxman law, which created the generic drug approval pathway, Saunders said.
Merck's Frazier said he agreed with Saunders on the double jeopardy claim, saying it does not make sense for drug patents to be subject to both the Hatch-Waxman law and the IPR system.
After lobbying efforts failed on Capitol Hill to get lawmakers to rein in entities that are abusing the IPR system by seeking lucrative settlements from patent holders, Saunders said he "felt like we needed to take an action" and pursued the St. Regis deal.
"I have no issues sleeping at night knowing that we did something to champion intellectual property for this industry," he said.
Putting a price on lifelong value
Meanwhile, another panel at the Forbes summit grappled with how to price and reimburse single-infusion gene therapies that provide lifelong value through restoring function in conditions like blindness or may even cure a disease such as cancer.
Novartis AG and Gilead Sciences Inc. already have faced criticism over the $475,000 and $373,000 prices of their recently approved chimeric antigen receptor T-cell therapies Kymriah and Yescarta, respectively.
And analysts have predicted that Spark Therapeutics Inc.'s gene therapy Luxturna could be priced at $1 million or more. The drug is intended to treat a rare progressive genetic eye disease that causes significant visual impairment, eventually resulting in near total blindness.
Luxturna won the unanimous backing of an FDA advisory panel in October, but it is unclear whether payers will be as enthusiastic about covering the product if regulators grant approval — a decision that is expected by Jan. 12, 2018, but could come sooner.
Spark CEO Jeffrey Marrazzo declined to confirm whether the company would price Luxturna at $1 million but said an analysis showed that amount was a reasonable cost based on what insurers pay for long-term disability to Americans who become blind and jury settlements for injuries resulting in permanent vision loss.
"We think when you look at that it places a value on what sight is," Marrazzo said.
Other factors Spark considered are the consequences of indirect costs of a person being unemployed due to blindness or a child's parent or other caregiver having to leave their job to care for the patient.
"Those are significant consequences," Marrazzo said.
But he also said Spark had an obligation to ensure access to its product.
"If you price it at a point that is too high and you don't have access, that's actually not maximizing, first and foremost, for the patients," Marrazzo said. "If you don't have patients who can get on therapy, get access to this one-time treatment, you're not maximizing anything when it comes to generating revenue."
Nonetheless, Spark must be fairly compensated for Luxturna's value, he said.
Getting insurers on board with paying up front for one-time therapies whose value over decades is not yet known is going to be a difficult challenge, said Nick Leschly, CEO of Bluebird Bio Inc. His company is developing a gene therapy to treat cerebral adrenoleukodystrophy, which involves a breakdown of the protective sheath of the nerve cells in the brain that are responsible for thinking and muscle control.
Leschly suggested payments for one-time only administered gene therapies or other innovative drugs could be made over time, like in installments, rather than in a lump sum — paying only when the product demonstrates it is continuing to provide benefit.
"The right thing is if it works you should be willing to pay more and pay for that innovation," he said.
The struggle will be whether payers will be able to get patients to return periodically to have blood drawn to test whether the initial benefit of the one-time therapy has continued to work, Leschly said.
"How do you track the patients? How do you think about portability if they leave and go with a new insurer?" he asked. Drugmakers will need to start thinking about earnings per patient rather than earnings per share, Leschly said.
"It's a different mindset," he said. "We want to think about how do you do value-based payments over time and can you tie it to sophisticating measuring."
Leschly acknowledged that may be difficult to execute, because of the U.S. government's rules in ensuring Medicaid receives the best price from biopharmaceutical companies — a mandate he said needs to be modernized to make way for possible mortgage-like installments for one-time administered gene therapies and other curative products.
Centers for Medicare and Medicaid Services Administrator Seema Verma, who spoke at a separate session at the Forbes conference, told reporters later the government may be interested in testing such models.
