Pfizer On Obamacare Rewind: No Short-Term Impact On Industry
Executive Summary
Pfizer CEO Ian Read explains why industry has stayed on the sidelines during the current health reform debate and defends drug pricing practices during a speech to the National Press Club.
House Republican legislation to repeal and replace portions of the Affordable Care Act (ACA) will have a negligible effect on the biopharma industry, Pfizer Inc. Chairman and CEO Ian Read said in a speech at the National Press Club in Washington, DC March 23.
"I don't believe there's any short term impact for the industry," Read commented in response to a question. But "there's a tremendous impact on patients in the short term."
He argued the coverage expansion provided by the ACA through individual and small group insurance plans sold through state exchanges has not provided any meaningful bump in business for drug firms because the plans have provided inadequate coverage.
Read's comments underscore the industry's lack of public support or participation in the current round of health care reform in Congress. That position stands in stark contrast to industry's engagement in the development of the ACA during the Obama Administration. (Also see "Health Care Reform and the Biopharma Sector: A Complete Tactical Victory" - Pink Sheet, 1 Apr, 2010.) He appeared at the press club as Republican leaders were struggling – unsuccessfully as of late on March 24 – to secure enough votes for House passage of the American Health Care Act, the first step in health reform "repeal and replace" effort.
Pfizer CEO Ian Read Photo credit: Noel St. John/National Press Club
Industry support for the ACA was driven by the threat of pricing controls, which seemed more likely then, and the promise of expanded access. Some stakeholders have questioned whether the tax concessions industry agreed to as part of the ACA have been worth the additional business gained through the coverage expansion.
The Affordable Care Act "has pushed into existence no first [dollar] coverage for pharmaceuticals" in the plans offered on the exchanges. "It has pushed into existence $6,000 deductibles before you get to any reimbursement."
Read noted Pfizer did an analysis of its business on the exchanges when the future of the market was being challenged by the King v. Burwell lawsuit, which dealt the application of subsidies on federally-run exchanges and was ultimately decided in favor of HHS by the Supreme Court. The company assessed how much it would cost to provide its drugs for free to everyone in the exchanges who were currently taking their products should the decision go against the government.
"No one's using our medicines on the exchanges because the exchanges don't provide them access."
"Cost to Pfizer? $40m," he said. "I mean in a $52bn corporation, that's nothing. … No one's using our medicines on the exchanges because the exchanges don't provide them access. So I think we need to reform health care the way it's delivered and the consequences will be for patients."
Read did not address the Medicaid overhaul contained in the House legislation, or its potential impact on the drug industry. HHS has reported 20 million gained insurance under the ACA, with the majority of those benefitting from the expanded eligibility provisions for Medicaid. The legislation currently under consideration could lead to 24 million losing coverage after 10 years, according to Congressional Budget Office estimates.
That could mean significantly fewer individuals with access to drug coverage through the program. Some analysts have also speculated that the repeal legislation could allow states to impose new restrictions on drug coverage in Medicaid. (Also see "Medicaid Block Grants: Allowing More State Flexibility To Limit Rx Coverage?" - Pink Sheet, 22 Mar, 2017.)
Pfizer has not taken a formal position on the American Health Care Act, Read said. However, "we support principles we'd like to see enacted, like the ability to access medicines, reasonable copays, fairness in the system, choice in the system. We support those elements of any plan."
It's Not Drug Pricing, It's The Cost-Sharing
Read's criticism of the insurance industry was a consistent theme during his presentation and is in keeping with his past comments regarding the public criticism of drug pricing practices. (Also see "Pharma CEOs Tackle A Tough Question: “Why Don’t People Like You?”" - Scrip, 6 Dec, 2016.) Read spent most of his prepared speech justifying the pricing practices of innovator companies.
He was asked how he would address the public perception that the pharmaceutical industry is profiting handsomely at the expense of patients with high drug prices.
"That perception needs to be addressed by really good insurance," Read said. "It needs to be addressed by saying that we as a society want to take care of women who have metastatic breast cancer and we value … this product and this product. If you didn't, I wouldn't be selling it at that price."
So "it's not your problem?" National Pres Club President Jeff Ballou asked.
"No," Read said.
"If we could speed up the FDA, if we could get drugs to market in less than 15 years, if we had a regulatory system that encourages innovation, we could bring lots more drugs to market, which could lower prices. We advocate for ways of making our industry more productive. The more productive we are, the lower prices will be because there will be more competition."
He also sketched out his own view of how to fix the problems in insurance. "I think the risks and rewards should be placed on the providers in our system," he said. They should be compensated for taking that risk and if they are taking that risk, they are totally incentivized to look to the health of their population and the treatments they give that population. That would focus them truly on health care."