Stephen Ubl took over reins of the Pharmaceutical Research and Manufacturers of America last September just as public outrage over high drug prices was hitting its peak. A nimble inside-the-Beltway operative, Ubl came to PhRMA from the Advanced Medical Technology Association, the medical-device makers' trade group, where he won a two-year reprieve from the Affordable Care Act's device tax. He recently sat down for an interview with Modern Healthcare editor Merrill Goozner. This is an edited transcript.
Modern Healthcare: Your industry is under attack by political candidates from left to right over high drug prices. Do you think you are being unfairly attacked?
Stephen Ubl: Unfortunately, a lot of the campaign rhetoric is born of the mistaken view that drug prices are fueling overall cost growth. (That) is myopic because it focuses on list prices, not on net prices. It doesn't focus on the value of the products. We're trying to educate policymakers on both the marketplace dynamic, which I think is misunderstood, as well as the value the products bring to patient care and healthcare systems.
MH: Yet over the past couple of years, drug spending has grown at a double-digit rate, while the hospital sector and the physician sector are growing about at the rate of the rest of the economy. What accounts for this higher spending on drugs, if not the higher prices?
Ubl: Brand net price increases last year were about of 2.8%. CMS' own actuaries look out from now until 2020 and see drug prices moderating and drug costs growing closer to medical inflation. But the broader point is drug prices are the wrong target. We should really be looking at the cost of chronic disease.
We all know that 80% of healthcare costs are driven by a small number of superusers. The majority of those costs are in institutional settings like hospitals, physician office visits and so forth. Better treatments and cures hold the greatest promise for ameliorating those costs.
MH: Some institutions like Memorial Sloan Kettering Cancer Center have limited the number of drugs they use. They say the price isn't connected to the value they bring to patients. Do today's drug prices reflect their value?
Ubl: We have a robust marketplace. We have a situation today where manufacturers are negotiating around value dimensions with payers and with the pharmacy benefit managers that now control about 80% of prescriptions written. Private-market negotiation is moving us toward a value-based discussion.
There are changes that we can make that will move us more expeditiously toward more value-based pricing arrangements. Unfortunately, you have a number of barriers in law and regulations that stand in the way. For example, FDA law and regulation preclude companies from talking about products before they are approved by the FDA. Or, even after they are approved, if a company has information that would form the foundation of an outcomes-based arrangement—say that a product reduces possible readmissions—that can also run afoul of FDA law and regulations.
MH: If we are on the edge of many scientific breakthroughs in medicine, how will we afford them given the prices put on the latest generation of breakthrough drugs?
Ubl: The good news is that we have this rich pipeline that is going to produce valuable medicines that are going to revolutionize patient care. The reason we can afford it is because of this fierce marketplace competition. We have this evolution toward value-based care where increasingly payers, PBMs and physician leaders are involved in robust negotiations with manufacturers around value.