President Kennedy
successfully persuaded US steel industry executives to manage their price
increases responsibly for the collective good by shaming them from his pulpit.
Would such a bully pulpit offer an effective answer to balancing the biopharma
budgets? Let us fast forward two generations from the early 1960s to assess
what has changed.

First, self-interest
has gained primacy today, at the same time as bipartisan decorum and the sense
of common good have declined. The ability to publicly shame an individual or a
company, let alone a whole industry, in this environment is open to debate.

Second, with the US
healthcare industry accounting for 18% of domestic GDP (and a still
considerable 10% of GDP in the rest of the world), multiple stakeholders have a
lot to lose, making it challenging even for a president to target such a
diverse group with conflicting self-interests. (In fact, as we write this,
reports from Washington indicate that a president who had called for price
controls and drug importation while accusing the biopharma industry of getting
away with murder has now succumbed to the same lobbying that tied his
predecessors’ hand. It appears that the centerpiece of this administrations
stick for the biopharma industry will be nothing more threatening than a mild
reform in the form of value-based pricing.)

Third, drug costs
account for less than 3% of the GDP in the US and most other major markets,
even though biopharma is a more tractable target with a few dozen major
players. So a bully pulpit is unlikely to make enough of a difference in
solving the healthcare cost problem.

At the core of the
matter, it is not so much a question of what percent price increases are
appropriate. The real challenge for a healthy society is to ensure that all of
its citizens have access to reasonable healthcare, including the benefits of
ongoing innovations, and to do so without bankrupting the system, or starving
other essential services, such as education and other infrastructure and
cultural opportunities that add up to a healthy quality of life.

Whether this essential
goal for any good society can be met by a particular form of healthcare system
is a topic for another set of columns. It goes without saying that it is not
possible to actually lower healthcare costs in an ageing society that is
fortunate to benefit from an accelerating flow of innovative therapies.

 The perennial objective therefore is managing
overall healthcare costs, and biopharma cost spikes within these costs for
their growing share of healthcare cost inflation. To date, the complexity of
healthcare systems globally has led to a patchwork of ‘Band-aids’. A holistic
solution remains even more elusive than a comprehensive tax system reform.

Time is rapidly
approaching, however, when legislators, managers, academics, and in fact all
stakeholders will be compelled to find a holistic solution as the only path to
maintaining a healthy quality of life.

In this approach,
there are many more levers to apply to the challenge than just the bully
pulpit; all anchored around both information technology (IT) and life science
innovations that call for a clean slate approach to deploy the tools that
modern technology has ushered in.

The contribution of IT
in transforming our lives is experienced moment by moment by all of us; though
its value in applying our vast data trove to drug discovery and development is
only beginning to be realized. These tools promise even more dramatic benefits
in healthcare delivery. Innovative online personal behavioral modification for a
better health and a more fulfilling quality of life, for example, may well be
the single most important opportunity for cost-effective healthcare. Beyond
such IT innovations, the post-genomic life science transformation is gathering
momentum. It is quite likely that the impact of life science breakthroughs on
our society over the next two generations will be greater than that which IT
has had over the previous two generations. We have seen early cures for more
accessible targets, such as HCV and certain cancers, and many more have become
manageable chronic diseases rather than a death sentence. The sum total of this
progress is even greater demand for healthcare, and at a much higher unit cost
– and the innovation cycle has only just begun.

Payer groups are responding
with a variety of pricing pressures, which will only intensify if the US
government limits its biopharma action to value-based pricing. EvaluatePharma
revised its biopharma sales projections down by nearly $400bn over the next
five years, primarily because of these pricing pressures, in what is likely to
be the first of such tapers.

Value-focused price
negotiations will expose one of the more difficult challenges facing biopharma,
namely, its legacy structures with their entrenched costs – how the industry
operates and carries out its discovery, development, sales and marketing
functions. Perhaps that is where the blended impact of IT and Life Science
innovation will provide disruptive answers, wiping the slate clean and creating
a brand new way of delivering innovative and effective healthcare.

The first steps, not
surprisingly, are being taken by non-industry players – thanks to their freedom
from entrenched costs, and their ambition to leverage their IT power to find
completely different pathways for biopharma innovation will make up for their
R&D inexperience. The changes being ushered in by the new US FDA
commissioner Scott Gottlieb to reduce regulatory risk (per his testimony to the
US Congress on June 20th) will benefit all companies, but those with a fresh
perspective may benefit sooner. Such bold regulatory refinements are likely to
win bipartisan support over time, changing cost calculi that may prove
catalytic for system wide acceptance of IT and LS innovations that disruptively
push out entrenched costs.

The ultimate shift
will happen when such new initiatives add up to a fresh framework for
delivering and procuring healthcare.

This column originally
appeared on Scrip Pharma Intelligence, June 28th, 2017