The Wharton Health Care Management Alumni Association recently hosted a segment on SiriusXM Business Radio Powered by the Wharton School about specialty pharmaceuticals, featuring leading thinkers in this area, including our own Patricia Danzon, Wharton’s Celia Moh Professor; Dr. Kevin Schulman, WG’88, a professor of business administration at the Duke Fuqua School of Business; and Dr. David Fajgenbaum, M’13, the second-year Wharton MBA who founded the Castleman Disease Collaborative Network (CDCN) to help battle a little understood and rare inflammatory disorder. Coincidentally, on the same day, Bristol Myers Squibb (BMS) hosted a Wharton event at its headquarters in Princeton, New Jersey, on cancer care innovation. This event was hosted by Dr. Joe Leveque, WG’92, who is vice president of oncology for BMS.
The specialty pharma market is growing rapidly, with the price for drugs in this market approaching $100,000 or more to either cure diseases or turn them into chronic conditions. Specialty pharma treatment typically relies on drugs that are expensive (more than $500 monthly), difficult to administer, require special handling, require ongoing clinical assessment, treat small numbers, and are bought and billed by clinicians. Examples of specialty pharma drugs are Harvoni for Hepatitis C (Gilead Pharma) and Gleevec for chronic myeloid leukemia (Novartis).
Our SiriusXM radio discussion on Nov. 18, 2014, centered on the government policies created to ensure access to these drugs and prevent undue financial hardship, but really do nothing to hold down price. The discussion, therefore, focused on the need for a definition of value and what this means to the payer, provider and patient communities—a definition which, in turn, can be used to assess whether these products should be made available; how payers are attempting to restrict access through precertification and tiered therapy models–using cheaper alternatives until the need for the more expensive drug should be used, which, in turn, creates ethical issues–and the need for higher pricing from pharma companies to ensure that innovation continues in this market. The discussion also centered on the research, development and clinical trial processes, which, based on how trials are designed, may also create higher pricing—when, for example, new drugs are evaluated in randomized trials with one arm of the trial consisting of the new drug plus the standard of care, versus the standard of care by itself. In these situations, the cost of the new drug is layered onto existing therapy creating even higher costs to the system. Each of these topics could be a blog on its own.
Several other issues arose, namely that value is in the eye of the beholder. In other words, the value of a drug should be assessed in regard to the person receiving it and not by those who do not have the condition. Furthermore, development of these types of drugs by academic researchers is a very inefficient process with redundancies, limited collaboration and incremental improvements. This part of the process is ripe for good business minds to make it more efficient and less costly. An example of this is Fajgenbaum’s efforts around the CDCN—a model that could be used a blueprint to streamline and accelerate development of new treatments and cost reductions.
It is really great to see how many of our alumni are right in the thick of such meaty and important issues.
Editor’s note: Listen to more of the same sort of stellar programming on the “Business of Health Care” show on channel 111. Visit the SiriusXM Business Radio website for show times and more information.
And watch the Business Radio Powered by the Wharton School promo video below to gain a better sense for what channel 111 is all about.