Big Pharma Fails Avoiding Drug Price ‘Control’? Even In The US? Why?

It ultimately happened – even in the United States, as the US President signed a bill on August 16, 2022 that aims to reduce healthcare costs, alongside fighting climate change, besides raising taxes on the rich. This new law was enacted, despite powerful lobbying and the vehement opposition of big pharma associations and that too in their home turf.

According to the Fierce Pharma report of the same day, since the current US President moved into the White House in 2020, the drug industry left no stone unturned battling to preserve pricing status-quo. It further added, the ‘pharmaceutical industry, including, PhRMA, its allies, and the nation’s largest pharmaceutical firms’ have spent more than $205 million in multi-media ads opposing ‘Medicare price negotiations’ and lobbying against efforts to lower drug prices for consumers.’

No wonder, when the bill was just introduced to the US lawmakers, big pharma’s disappointment on the bill was palpable. This gets well-captured in what the AbbVie CEO pointed out at that time. He said, ‘the legislation would force manufacturers to accept the government’s proposed price or face a harsh tax on their revenues from a given product.’ He also said: “So, it’s not a negotiation,” as stated in the bill. He further opined in his conference call: “We should just call it what it is. It’s price controls,’ which is what the lawmakers are ‘basically putting in place, if the language stays the same,’ the AbbVie chief added.

Capturing this new development in the United States, at least, in the recent past - Fierce Pharma in its August 08, 2022, issue commented: “The seemingly unstoppable pharma lobbying force has lost its charm. With the passage of a new bill, the U.S. Senate is opening the door to major drug pricing reform, leaving the drug industry licking its wounds.”

In the Eldorado of the global drug industry, this is indeed an unprecedented initiative to significantly reduce costs of many important drugs and reduce patients’ out of pocket expenses. Consequently, it has created so much of hullabaloo, across the world, for various reasons. In this article, I shall track this emerging scenario along with the message that it sends across the globe, and its possible impact on new drug innovation to meet unmet needs of patients. In India, one such area could be revisiting the price negotiation proposal for patented drugs, a government initiative that failed to take off earlier.

Would lowering prices stifle new drug innovation?

The apprehension, I reckon, that big pharma will continue to play with - price control will stifle new product innovation – adversely impacting patient interest. Notably, to many industry experts, this argument doesn’t just lack robustness, seems more a conjecture rather than the outcome of any peer- reviewed research study findings. On ewthe contrary, several highly credible and independent studies prove otherwise. Thus, let me put hereunder:

  • One – what big pharma directly and through their powerful industry associations or some financially sponsored studies are saying
  • And – what the top experts concluded from their independent analysis in this regard, as published in the globally acclaimed journals.

I leave it to my readers to evaluate the credibility of each to form their views.

Drug industry arguments supported by recent studies:

The findings of a study conducted recently, with the financial support of the Pharmaceutical Research and Manufacturers of America (PhRMA), the Biotechnology Innovation Organization (BIO), Amgen, Pfizer, Alexion, AbbVie, Genentech, and Bristol Myers Squibb, were released by PhRMA on November 23, 2021. The study was conducted by Vital Transformation. The key findings of this study highlighted: ‘Every 10% drop in the price of medicines in price-controlled EU markets was associated with a:

  • 14% decrease in total VC funding (10% early stage and 17% late stage)
  • 7% decrease in biotech patents
  • 9% decrease in biotech start-up funding relative to the US
  • An 8% increase in the delay of access to medicines.

It concluded: ‘Drug pricing controls implemented in the US would likely have an even greater impact on Biopharma KPIs given its global leadership in investment and innovation.’

Independent expert studies, published in highly reputed journals:

Around the same time as the above report, an independent study published in the Harvard Business Review (HBR) on October 01, 2021, found exactly the opposite. It categorically stated: ‘The U.S. can lower drug prices without sacrificing innovation.’

The paper summed up: ‘With Congress considering legislation to allow Medicare to use its bargaining power to negotiate lower drug prices, large pharmaceutical companies are once again waging a campaign that contends that doing so would seriously harm the development of breakthrough drugs. This is not true. Smaller companies now account for the lion’s share of such breakthroughs. The key to supporting drug innovation is to increase NIH funding of the efforts that give rise to these new companies, cut the costs, and accelerate the speed of clinical trials, and reform patent law.’

Drug pricing in the Indian context:

Prices of, especially, new drugs and the overall cost of healthcare are two major concerns – more in the developing countries like India. Responding to this need drug price control for pre-defined essential medicines are already in place in the country. More recent studies further vindicate the relevance of such regulation from the perspective of affordability of drugs for the poorer section of the society, and where out of pocket expenses are very high.

Let me quote one such paper, published on June 04, 2022, which received no outside financial support from this study, where the researchers concluded: ‘With induced demand and an inadequate competitive environment, the pharmaceutical industry fails to reduce prices. Supply-chain trade margins are very high. Hence, government intervention through price control of essential and life-saving drugs is a necessity in India.’

In this context, another question that is being raised – are there other alternatives to expand access to high-priced life-saving drugs at an affordable cost to all those who need those most? The most common alternative that floats, encourage more competition for those drugs as soon as they go off patent. Let me examine what’s big pharma players are doing in that area.

Does Big Pharma encourage increasing competition to reduce drug prices?

Another way to reduce the price of an expensive product is encouraging competition to enable market forces bring down the price. An interesting article on breaking the rule of drug pricing by pharma companies was published in the Forbes magazine on June 29, 2022. I also wrote on June 10, 2013: ‘To scale-up access to health care, especially for the marginalized population of any country, greater access to affordable generic drugs will always remain fundamental, besides improving healthcare infrastructure and its delivery mechanism.’

Thus, there should be a robust mechanism, across the world, to facilitate quick entry of cheaper generic equivalents immediately after patent expiry of the original molecule. Increasing attempts of blocking entry of generics surreptitiously by vested interests, leaves no other alternative, but price control. This is imperative, ‘as without the availability of newer generics, unmet medical needs of the most vulnerable section of the society cannot be met effectively by any country, as I wrote there.

Attempts to game the system to minimize competition continue unabated:

Even after my article, this red flag is being raised for quite some time. It will be evident from another Harvard Business Review article titled, ‘How Pharma Companies Game the System to Keep Drugs Expensive,’ published in the on April 06, 2017. Acknowledging: ‘Drug development is risky and expensive, thanks to the long testing and approval process,’ the author concluded from their study – ‘But, increasingly, makers of branded drugs are using a variety of tactics to extend their exclusive rights,’ enabling them to maintain high drug prices for much longer time.

More recently, the above Forbes article of June 10, 2022 also highlighted, ‘even the most generous patent protections come to an end and companies must face the potential for generic competition. That’s when major drug manufacturers shift tactics from influencing policy to crushing the competition.’ There are several legal and semi-legal approaches that big pharma players adapt to game the system and maintain pricing monopoly. Let’s recap it with just three of these examples:

- ‘Patent Thicket: Delaying entry of lower price off-patent molecule through a Patent Thicket. This involves creation of ‘a dense web of overlapping intellectual property rights that a generic pharma company must hack its way through in order to actually commercialize new technology of a drug molecule,’ even after the original patent expires. For example, AbbVie’s Humira, the world’s best-selling drug for a long time. I also discussed this issue in my blog over three years ago – on April 22, 2019.

- ‘Pay-for-delay deals’:  I discussed this issue in this blog on June 19, 2013. Moreover, the above Forbes article of June 29, 2022, also underscored this tactic. It explained that this is a deal in which drug companies agree not to compete for a set amount of time to maintain high prices of their brand-name drugs. The article, published in Bloomberg Law on February 20, 2020, captures it nicely.

- Authorized generics: As many would know, law permits six months of exclusivity to the first generic version of an off-patent new molecule coming into the market. Interestingly, just before patent expiry of an innovative drug, several drug makers roll out their own generics to stifle competition. Although, they keep different names for the generic versions, but pricing remains almost similar. Such a practice obliviously delays the entry of cheaper generics, at least by six months.

In this scenario, the new drug prices continue racing north. Something was to be surely done – for patients’ sake, as many believe, at least, where it all started – the US.

New drug prices are highest in 2022:

As reported by Reuters on August 16, 2022:

  • Eight of 13 drugs launched in 2022 priced over $200,000 per year
  • Median annual price for new U.S. drugs this year is $257,000
  • Some drugmakers disclose less information on pricing

Despite this, as reported on August 15, 2022: ‘The main U.S. drug lobby has said it will push back against the legislation, which includes policies that drug makers have opposed for decades.’

Conclusion:

The significance of the above development in the US healthcare scenario, was aptly summed-up by the US House Speaker, as she said: “If you are sitting at your kitchen table and wonder how you’re going to pay the bills – your health care bills, your prescription drug bills – this bill is for you.” For the first time in the US – the champion of champions of free-drug pricing market, will negotiate the drug price with their manufacturers to become patient -centric.

The reverberations of this difficult decision, especially on new drug prices, are expected to prompt the need for price negotiation or price control, primarily for expanding access to new drugs for a larger number of patients. This deserves to be a focus area for the Government, including India. Moreover, the August 18, 2022, media report also suggests that the top court of India may now encourage the Government to investigate, report and take remedial action on drug industry malpractices.

Finally, it’s worth noting that over a decade ago, international media widely reported -  ‘India considering price controls for patented drugs.’ Its objective was to address the aggressive new drug pricing trend in the country. Accordingly, the price negotiation proposal for patented drugs was notified by the Department of Pharmaceuticals (DoP) in 2007. The constituted Committee submitted a report, as well, on February 21, 2013. But it did not take off as on date. Many apprehend, this is due to intensive and ongoing lobbying by big pharma, just as what happened in the US. Nevertheless, the question that surfaces – will the above new drug law in the largest pharma market in the world encourage the DoP to revisit price negotiation for patented drugs - to make modern drugs affordable to a larger patient population in India – now?

By: Tapan J. Ray

Disclaimer: The views/opinions expressed in this article are entirely my own, written in my individual and personal capacity. I do not represent any other person or organization for this opinion.

Winning By Creating A Strong Pharma ‘Brand Identity’

Since the beginning of 2022, several top global pharma majors are exhibiting their renewed focus on creating a new corporate ‘brand-identity’. Its key purpose is to chart a new strategic frontier where their brands will stand out in the highly competitive pharma market – gaining a greater share of mind of the customers.

This happened recently with GSK, as reported on June 9, 2022. Prior to this announcement, on February 03, 2022, the French pharma major Sanofi, reportedly, undertook a similar change to refocus on a new brand-identity. It began with a new simplified logo of plain “Sanofi,” apparently, signifying a nod to the tech world.

Against the above backdrop, in this article, I shall deliberate in the process of winning a marketing warfare by creating, and effectively leveraging a strong pharma corporate ‘Brand Identity.’

Instead of starting this discussion with what changes the above companies have made and why, let me try to be on the same page on two important facets in this area. First – what is generally considered as critical ingredients of a ‘brand identity.’ And then – why initiatives of creating a targeted and stronger pharma ‘brand identity’ are gaining increasing importance to pharma marketers of many top companies, across the word.

Some critical ingredients of brand identity:

As defined by the April 11, 2022, issue of Investopedia: ‘Brand identity’ reflects the intent behind branding with the visible elements of a brand, such as color, design, and logo, that identify and distinguish the brand in customers’ minds.

The ‘brand identity’, therefore, encompasses, appropriate brand name selection, designing a logo commensurate to the company intent, well-thought through color selection, use of shapes and other visual elements that will facilitate brand promotion. Above all, employees who are at touch points of patients’ disease treatment process need to be thoroughly explained and appropriately trained to effectively leverage the purpose of change.

‘Brand identity’ is different from ‘brand image’:

It’s important to note that ‘brand identity’ is quite different from ‘brand image.’ While ‘brand identity’ relates to the intent behind the branding – creating and cultivating a strong ‘brand image’ in the customers’ mind – is its purpose. ‘Brand image’ educates customers about both intrinsic and extrinsic values that the brand offers through ‘Omnichannel’ targeted communication. This process helps create customer loyalty.

Increasing importance of stronger pharma ‘brand identity’:

A new trend alerted many pharma leaders, as brand new Covid-19 vaccines started being available to the public. For a vast majority of the population, across the world, vaccines were construed to be the only savior against the unprecedented life and livelihood disruptor – Covid-19 pandemic.

Interestingly, right from the regulatory approval of the first Covid-19 vaccine, although, all such vaccines had brand names – general public, doctors, media, even the World Health Organization, or Governments, started calling vaccines, predominantly, by company names. For example. AstraZeneca Covid Vaccine, Pfizer Covid vaccine, Moderna Covid vaccine, J&J Covid vaccine, and so on. Even the Corporate head honchos of respective vaccines and Covid related drugs, came to the fore with corporate branding to establish a meaningful relationship with the customers. Accordingly, in the marketplace, establishing a strong corporate brand identity has assumed greater importance, more than before. 

Studies vindicate this point:

That a strong corporate ‘brand identity’ helps create a differentiable product image, has been captured in several studies. For example, a study published by PharmaVoice on August 28, 2014, came to an interesting conclusion. After analyzing a situation in which multiple pharmaceutical companies developed a similar oncology product for the same indication, it said: “All things about the product being identical, including the price, we asked which company’s product would the oncologists recommend. The companies with the best company brand images scored highest, proving that company image alone would have a significant impact on recommendation behaviors.”

Would pharma’s strong corporate ‘brand identity’ impact the bottom line?

Several independent studies have also proven the same. For example, a mere 5% improvement in the strength of the company’s brand image and reputation could be expected to produce, on average, a 1.5% uplift in the share price over the year, translating to about a $550 million increase in market capitalization.

Acknowledging this point the above paper underscores: “Thus, any pharmaceutical company that wants to succeed and sustain a healthy, long-term competitive advantage, create differentiation in the short term, and insulate itself from weather storms of clinical disappointment, which invariably occur in pharma, would want to invest in corporate brand identity development that includes all drivers of reputation and relationship.”

It is happening more, especially in post Covid-19 pandemic period:

Let me now go back to where I started from. I started by saying: ‘Since the beginning of 2022, several top global pharma majors are articulating their renewed focus on brand-identity.’ I also wrote about deliberating what changes, especially the two pharma majors have made to strengthen their corporate ‘brand identity’ – for different reasons.

Let me start with GSK:

According to June 09, 2022, edition of the ENDPOINT NEWS, GSK – as it transforms into a pure Biopharma company – unveiled the reinvented company and the corporate brand to its employees first – on June 08, 2022, with the intent to bring everyone in the global company together.

The Company says, it’s about a way more than a logo. The Biopharma-only GSK believes, it has adopted a new purpose – “to unite science, technology and talent to get ahead of the disease together,” besides a new strategy, ambitions, and revamped ‘brand identity’.

The new corporate ‘brand identity’ of the corporation is a blend of familiar and modern of its vibrant orange brand color that remains. Now it’s a three letter-only corporate name - all uppercase and standalone - reimagined in a curvy contemporary logo. The new GSK logo “takes inspiration from the visual language of biosciences, genomic sequencing and data analysis, but – still feels warm and human,” as explained on the GSK website.

According to the Company, the new GSK’s ambitions also include people. It’s the final goal in its three debuted ambitions – impact the health of 2.5 billion people in the next 10 years, achieve specific competitive growth goals and make sure employees are thriving.

Coming to Sanofi:

According to Fierce Pharma of February 03, 2022, Sanofi also undertook a similar change at the start of the year. Ditching the Pasteur and Genzyme of old, the Company decided to go for a new ‘brand-identity.’ It rebranded itself as plain “Sanofi.” That switch also came with a new, simplified logo with a nod to the tech world.

According to Sanofi Press Release of February 03, 2022, the French pharma major’s ‘rebranding centers on a clean, lower case new logo. ‘The new logo is a representation of Sanofi’s new purpose and ambition, which is inspired by the simple and motion-oriented codes of the tech industry. The two purple dots embody the scientific journey between a starting point – the curiosity of questioning the status-quo and wondering “what if?” – and a finish line – the eureka moment where innovative solutions are unlocked to impact people’s lives’, it explained.

“With our new brand, we have sought to provide our people, our partners, patients and healthcare professionals with a clear and strong understanding of who we are and what we are set to achieve,” Sanofi highlighted.

The Company further reiterated: “Sanofi’s attitude is humble, authentic—and a little bit unconventional, too. We believe that our new brand and logo carve out a unique space in the healthcare industry that perfectly represents our new purpose to chase the miracles of science to improve people’s lives.”

Conclusion:

The journey of creating corporate pharma ‘brand identity’ initiatives is highly cerebral and originates from the top echelon of pharma management team.  The key objective of creating a strong corporate ‘brand identity’ is to ensure that the brand effectively depicts its own unique stance to the customers and differentiate itself from competitors in the marketplace.

I explained above, this process encompasses all branding activities of the company. The aim is to make the company to be perceived in a particular way by the target audience. Which is why, creating a strong corporate ‘brand identity’ is critical in shaping a unique corporate image, especially in generics dominated Indian pharma industry.

It goes without saying, such differentiation, in turn, helps expanding a loyal customer-base for performance excellence, more in the post Covid pandemic environment of India. Even, global pharma majors, are recreating their new brand-identity, for various reasons, and trying to leverage it effectively, to carve out a greater share of mind of more and more customers.

By: Tapan J. Ray

Disclaimer: The views/opinions expressed in this article are entirely my own, written in my individual and personal capacity. I do not represent any other person or organization for this opinion.