Dan Renick’s Prescription for Prosperity in the Pharmaceutical Industry

In some respects, the healthcare industry has garnered a reputation for falling behind the times. But the prescription drug market seems to be bucking that trend, as manufacturers, lawmakers, and consumers notice a plethora of changes taking place, even over the past two years. Within this market, one issue seems to have climbed above the rest to capture the public conscience: rising prescription drug costs.

Dan Renick, president of Precision Value & Health, has been in the trenches working to help drug manufacturers, healthcare providers, and patients tackle this complex issue and help reduce the financial burden of critical medications to the people who need them.

Renick sat down with American Healthcare Leader two years after our first discussion to elaborate on changes to the prescription drug supply chain, the impact of the Trump administration, and what Precision Value & Health is doing to help eliminate market-access barriers for patients seeking innovative new treatments.

What are some of the biggest factors driving change in the prescription drug market right now?

Renick: It’s definitely been a wild and eventful two years. I think most notable is the impact of the current administration and how they have forced a reckoning of sorts across the pharmaceutical industry and, more broadly, the role the supply chain plays in the prices consumers ultimately pay.

As a result, the pharma industry has really been on the defensive like I’ve never seen before, and some might suggest that the political clout the industry once enjoyed has diminished quite a bit.

Another factor is the meaningful advancement of potentially curative treatments that could drastically improve and extend the lives of patients with dreadful conditions like hemophilia and Hepatitis C. The number of cell and gene therapies in the pipeline now should be appreciated by all of us because it represents the tireless work of researchers, scientists, and many others who want to improve the health of patients.

What recent federal rules or regulations are making a particularly significant impact on the industry?

Renick: One of the more recent proposals is the potential change announced by US Health and Human Services Secretary Alex Azar in February 2019 to the safe harbor rebate for pharmacy benefit managers that participate in Medicare and Medicaid programs. The goal of this proposed change is to pass drug discounts directly to consumers to reduce their financial burden at the point of sale, where it really matters.

In addition, the discussion about whether the United States should use international reference pricing to determine the amount the government should reimburse for drugs is also significant. Ultimately, this is somewhat of a threat, if you will, to the pharmaceutical industry by saying, “If you continue to have lower list prices in other countries as compared to the US, we’re going to use that against you in the form of reference pricing.”

What trends have you seen emerge in the industry over the past couple years?

Renick: We’ve got a little bit of a conundrum. On the surface, it appears that net drug costs have been basically flat for several years now. But in terms of what patients have to pay out of pocket, we’re seeing an increasing burden that is garnering a lot of attention. This is an unfortunate consequence of a perverse drug supply chain where we have a number of participants that have grown too reliant on list-price increases to support their business model.

While these price increases are typically accompanied by greater discounts, in parallel we have health insurance plans that increasingly peg a consumer’s out-of-pocket expense to a drug’s list price, without regard to the discounts flowing to health plans. Because of this, consumers bear the brunt of rising list prices. Across Precision Value & Health, we have assembled the ideal blend of scientists, health economists, and former payer decision-makers to support clients in demonstrating and communicating the value of innovative medications so that the financial burden for patients can be reduced.

Beyond a dependency on list-price increases, what issues do you see in the drug supply chain?

Renick: The supply chain consumes roughly half of the marketplace right now. So, if we’re a $300 billion market, estimates are that about half of that goes into the supply chain in the form of fees, discounts, and rebates. This has created a gross-to-net bubble in legacy drug pricing, which refers to how much drug manufacturers have to discount the list price to make their drug widely available. On average, the gross-to-net bubble is about 50 percent.

However, newly launched drugs and pending drug approvals have an opportunity to correct this deeply flawed model by entering the market at a price that is linked directly to actual value provided to patients, payers, and society. We work closely with clients during the drug development process to ensure value is established and reflected in eventual pricing decisions, and, when executed effectively, there’s little to no reliance on discounting schemes that may ultimately hinder a patient’s ability to access and afford a new medication.

What is Precision Value & Health doing to help solve these issues?

Renick: We’re continuing to expand our services offered to our pharmaceutical and life sciences clients related to the evaluation and generation of evidence they will need to prove the value of their drug in the marketplace. We strive to have our clients focus on the economic endpoints and patient-related outcomes that help demonstrate humanistic, economic, and societal value of their treatments. Another aspect of what we do is help clients effectively and dynamically communicate the value of their medicine to all necessary stakeholders, including payers, patients, and providers.

There’s been a shift in the industry to make more information about drugs available in the preapproval stage, whereas before it was only made available very close to or right after a drug was approved. This allows payers more time to evaluate information and make informed decisions about newly available drugs.

Looking ahead, what can drug manufacturers do to become better partners to payers and consumers?

Renick: First and foremost, be diligent with price setting and how it links to value and out-of-pocket costs for patients. Manufacturers must also evaluate how their drugs are effectively distributed or how patients can get access to a particular drug. We continuously work with clients to develop and execute innovative drug distribution approaches that are seamless for patients and providers, eliminating a potential obstacle to access.

Clients also need to invest resources in spreading awareness of new treatments to healthcare providers as well as helping them to understand appropriate patient types. Having a physician who has not been made aware of treatment changes through no fault of their own is a barrier to the patient getting the right therapy at the right time. All of these things will ultimately support optimal market access for patients.