[AI Supercharges Fentanyl Production And Distribution, Study Finds](https://wbbsec.com/opinions-and-features/ai-supercharges-fentanyl-production-and-distribution-study-finds/)
[AI Supercharges Fentanyl Production And Distribution, Study Finds](https://wbbsec.com/opinions-and-features/ai-supercharges-fentanyl-production-and-distribution-study-finds/)
In: Opinions & Features

11.23.15 | Forbes

By Steve Brozak

To read the entire article on Forbes, please click here.

All eyes are fixed on the declared merger of Pfizer, Inc. and Allergan plc, which has the impact of an inversion, and the questions quickly become: Is it a game changer, a challenge to Treasury’s new tax inversion guidelines, or just riveting financial drama? However, there is a different sort of healthcare drama that is playing out that is even more important to the drug industry’s bottom line. You see, for seven hours on Friday, experts in the pharmaceutical industry, including Merck & Co, Inc., Novartis International AG and Express Scripts, as well as HHS and Medicare officials, the insurance lobby and Kaiser Permanente, debated the sustainability of skyrocketing drug pricing.

In the HHS panel format they grappled with issues addressing how government and industry could control the trajectory of those prices. Influential interest groups like AARP reminded participants of the negative impact on everyday Americans. With no small irony or mention of Pfizer and Allergan, Kaiser’s CEO among many speakers blamed pharmaceutical corporate mergers for wild price hikes making medicines unaffordable and inaccessible.

Investors in Big Pharma and Big Biotech followed the forum with trepidation and one question: What would this all mean for their investments? But because it was not a high-profile congressional hearing on a proposed bill or presidential announcement of an executive order, many investment firms and companies generally think the meeting was just a PR show, all sound and fury with no action plan.

But such assumptions are short-sighted, missing the importance of the pending national election, the outgoing president’s willingness to circumvent Congress to make small but significant regulatory changes in key areas of the economy, and the impact of the public outrage over Turing and Valeant Pharmaceuticals Intl Inc.’s high pricing strategies.

Sure, investors don’t need to panic yet that we’ll suddenly see the Medicare negotiation of drug prices. Even though PBMs, insurers and the medical groups agreed that direct negotiation between CMS and industry is the first and easiest way to start tackling the price issues, most indicated that won’t happen anytime soon. Indeed, preventing Medicare negotiation, part of the 2003 Medicare reform bill, was one of the top four demands from the pharmaceutical industry in 2009 that the Obama White House agreed to in return for getting Big Pharma’s support for the Affordable Care Act. Additionally, there’s little chance that investors will see ham-handed moves like price caps or Congressional legislation.

But here’s why the forum should matter to investors as much as the contemplated merger: The administration put together blue-ribbon panels and speakers quickly in the wake of the Turing and Valeant explosion. They wanted to hear specific proposals and what they got were a number of innovative, detailed ideas from insurers, the giant PBM Express Scripts, government officials and Kaiser Permanente, which covers more than 9 million patients in the US.

But what they didn’t get were specific proposals for cost containment from the drug industry. This was an opportunity for Big Pharma to be proactive – or at least sound proactive and show the Obama administration and other stakeholders they were ready to engage on cost controls and on pricing transparency. Instead this morning Big Pharma showed it was happy to provide more of the same. Timing is everything.

During the forum, industry, represented by leaders from Merck and Novartis, relied on traditional talking points – don’t do anything to quash innovation; allow us to tell doctors more about off-label usage ideas that expand our market; measure the value of a drug over a longer time, maybe even a lifetime, then you’ll see it’s not priced too high. All of these are legitimate. But none of them help the industry avoid the coming private and government forays into piecemeal pricing solutions, such as performance-based costs and bundling, that could be applied systematically later.

In the last panel, the vice president of AHIP, a government official involved with medical pricing policies for federally insured employees, the medical director for Express Scripts and the CEO for Kaiser Permanente politely, but forcefully, took on the industry, represented by Ken Frazier, CEO of Merck, and currently chairman of the board of PhRMA, the drug makers’ lobby.

The bottom line is that even though the administration doesn’t seem ready to fight a scorched-earth battle over Medicare drug negotiation, it is ready to support insurance companies, pharmacy benefit managers and hospital networks that develop and implement new, narrowly focused programs to control prices. In fact, HHS and CMS are working on new payment models for oncology care that include performance factors and for biosimilars.

The hope, expressed by Express Scripts’ Dr. Steve Miller, is that these initial programs will eventually be applied to wider swaths of drugs and diseases in the interest of public health. In fact, Miller had the best one-liner of the day, and you’ll probably be hearing it repeated by politicians and insurers: “If Jonas Salk had priced the polio vaccine like we see some of the prices today, we’d still have polio today.”

Frazier also had a good moment when he became indignant about Turing’s recent price hike of a monopoly AIDS drug and its CEO, Martin Shkreli. “I don’t consider them part of the industry. Turing’s CEO is a hedge fund manager masquerading as a pharma exec. We believe great drugs can change the world, we don’t believe profit sharing changes the world.” What was left unsaid was the effect of M&A on drug pricing.

Bernard Tyson, CEO of Kaiser Permanente, who had been poking drug companies during that panel session, jumped in. In a prescient statement he criticized the multiple pharma mega-mergers of recent years, adding that he gets stuck with their repriced drug “$100,000 bill,” stating, “I absolutely believe the government should be sitting at the table with its purchasing power, sitting across the table from the pharma industry.” He noted that Kaiser has been more aggressively using the size of its patient base to play hardball with pharmaceutical companies, indicating there’s more of that to come.

In 2008, Big Pharma was under fire for spending billions on TV ads for drugs, sometimes pushing the limit of credibility. Congress made serious noises about implementing pharmaceutical ad limitations. Then PhRMA CEO Billy Tauzin, a former Congressman, announced right before a Hill hearing that his members had just agreed to adopt a new, self-regulatory program on their commercials. It was proactive, and it was frankly brilliant. It saved industry probably hundreds of millions of dollars in sales by keeping corporations one step ahead of government restrictions on marketing.

Friday’s HHS drug pricing forum was a chance for Big Pharma to proactively address drug pricing concerns. The tenor of the conference belied a stormy outlook. Unfortunately today’s Pfizer/Allergan M&A announcement has little chance of holding back the coming fury.