Subsurface Currents

From a drug price policy perspective, we might well describe the COVID-19 pandemic as an extended period of slack water, a prolonged moment unstressed in the tidal stream of price, where there appeared no movement in either direction. Beneath the surface, however, much was churning. Both Teva Pharmaceuticals and AbbVie withdrew membership from the Pharmaceutical Research and Manufacturers of America (PhRMA) trade association, which most observers connect to passage of the Inflation Reduction Act (IRA). This legislation slowly phases in Medicare’s capacity to negotiate the prices of certain medicines. AbbVie’s CEO, Richard Gonzalez, testified that the bill imposes “price controls.” rather than allowing negotiations (1). It is certainly a debatable point. In his State of the Union speech, President Biden emphasized, in particular, efforts to lower the price of insulin to help senior citizens, and patients more broadly, by extending a $35-a-month cap. Biden noted that the IRA enacted in 2022 also capped annual out-of-pocket drug costs for Medicare patients at $2000 a year and predicted that the drug price negotiation provision in that legislation will further reduce Medicare outlays for medicines (2).

Somewhat foreshadowing the optics of all this, in an expansion of the company’s “an Accord for a Healthier World” program (which is aimed at increasing access to innovative treatments in some of the world’s poorest countries), Pfizer said it will now offer a total of 500 products, its full portfolio of drugs, including off-patent medicines such as chemotherapies and oral cancer treatments, on a not-for-profit basis to 45 low-income countries (3).

An equally important undercurrent potentially unobserved, might be Mark Cubans’ Cost Plus Drug Company (MCCPDC). Their consumer pricing model is elegantly simple: manufacturing costs + 15% margin + $3 charge for pharmacy fulfillment. MCCPDC has their own Pharmacy Benefits Manager division that negotiates with the manufacturers of approximately 1000 generic drugs. They have a mail-order pharmacy that fulfills prescriptions for generic drugs and sells them direct-to-consumer. And they’ve built a manufacturing facility where MCCPDC can take pharmaceutical formulations for generic drugs and become their own suppliers. With vertical integration, this company offers drugs at a huge discount (4). That wave beginning to crash over PhRMA’s gunwales may well emanate from a startup mindset, rather than Big Pharma or government policy pundits.

References

1. US 117th Congress. Unsustainable Drug Prices (Part III): Testimony from AbbVie CEO Richard Gonzalez. House Oversight and Reform. May 18, 2021.

2. Wechsler, J. Biden Hits Drug Prices for Boosting Health Care Costs. PharmTech.com. Feb. 9, 2023.

3. Reuters. Pfizer to Sell All Its Drugs in Low-income Countries at Non-profit Price. Reuters.com. Jan. 17, 2023.

4. Cuban, M. A Letter from Mark Cuban. Our Mission. CostPlusDrugs.com (accessed Feb. 21, 2023).

About the author

Mike Hennessy Jr. is the President and CEO of MJH Life Sciences.

Article details

Pharmaceutical Technology
Vol. 47, No. 3
March 2023
Pages: 8

Citation

When referring to this article, please cite it as M. Hennessey. Subsurface Currents. Pharmaceutical Technology 2023 47 (3).