Patient’s Access to Life Saving Drugs
Drugs; Consumers and the media are starting to notice that a number of pharmaceutical companies are snapping up older drugs from competitors and raising prices. In 2015, as the Wall Street Journal pointed out, companies like Horizon Pharma, Mallinckrodt, and Valeant have acquired the rights to CVD and pain medications and increased their prices anywhere from 200% to 1,000%. Furthermore, since the first quarter of 2014, 27 branded drugs have showed price hikes of at least 20% per dose. Even new, potentially groundbreaking drugs are experiencing exorbitant costs. These drastic price hikes threaten the economic fortitude of the pharma and healthcare industry as well as the wellbeing of patients.
Why are companies hiking up prices?
One of the most significant factors behind these price hikes is a quirk regarding the Food and Drug Administration guidelines, specifically those that involve older medications. Nearly 10 years ago, the FDA decided to focus more on bringing older drugs into its contemporary drug approval process. As a result, some drugs were “grandfathered” into the approval process. To facilitate this, the FDA offered pharma companies an incentive: In exchange for doing the heavy lifting of integrating new drug applications for older medications, the company would be given limited exclusivity to the new drug. The FDA would subsequently remove the older “grandfathered” treatment. Consequently, many pharma companies saw this as an opportunity; a gold mine. With limited testing and limited risk, a pharma company could quickly procure exclusive rights to an old drug, and most importantly, charge whatever price it wanted.
The pharma industry also often defends its inflated prices and price hikes by alluding to the need to raise revenue and provide value to shareholders in order to fund other major R&D initiatives. The mindset is that, with robust funds and enthusiastic investors, new and improved drugs will be developed over time. Additionally, the pharma players involved in the development of these drugs assert that the costs to study and manufacture them were incredibly high, arguing that the benefits to the public outweigh the costs.
How can Healthcare Providers, Wholesalers and Pharmacies prepare for future price hikes?
With the unpredictable and volatile prices of new drugs entering the market, pharma companies will need to prepare for potential business disruptions, changes in pharmaeconomic conditions, shifts in customer and patient preferences, and adjustments in the regulatory environment. To improve flexibility, companies consider scenario planning, which is a strategic planning method that organizations use to create elastic plans. It allows executives to analyze and prepare for several plausible scenarios, which will allow business leaders to pivot and quickly apply initiatives as changes in the pharma-business environment occur. By bringing up and testing different “what if” scenarios surrounding the industry, leaders can conceptualize and challenge hypothetical assumptions in a non-threatening environment prior to deciding the best course of action.
Nonetheless, it’s important to realize that if patients can’t afford these expensive medications, no matter how amazing, new, or improved they are, how would their existence even matter? No one is denying these companies’ rights to earn a healthy profit for their shareholders. However, in the compassionate and righteous society we strive toward, maximizing profits should come second to promoting the health and wellbeing of individuals and their communities. In the end, this narrow strategy of massive price hikes could easily backfire on healthcare providers, pharma companies, and most importantly, patients. With a number of new drugs expected to enter the market within the next few years, the pharma industry will have to prepare for the impact on the economy due to prices increases.
How can WGA help?
WGA is passionate and dedicated to helping clients make and execute the big decisions on: strategy, operations, transformation, technology, organization and compliance. WGA’s guiding belief is that as trusted advisors, we must measure our results from the enduring financial success of our clients. This belief and passion can be seen in our growth, our people, our services, and our relationships.
Our experience allows WGA to offer singular and unique objective recommendations and execution services that will give companies the ability to adapt, renew, and prepare themselves to succeed in a turbulent environment. We provide Strategy Consulting that can help with scenario and contingency planning, and Business Transformation services that can facilitate the integration of any structural changes. From strategy to operations, we are committed to helping our clients build their functional skills and sustain performance. We recognize that only through our clients’ success can we achieve ours.