Gottlieb Proposes Pharmaceutical Segments for Pricing Strategies

At AHIP’s 2022 conference, Scott Gottlieb, M.D., former FDA commissioner joined a panel discussion on “Balancing Prescription Drug Affordability, Innovation and Access”.  He contends that there cannot be a one-size-fits-all solution for pharmaceutical pricing in the US.  He proposes three segments for bucketing drugs with unique policies for each.

The approach does not use the current drug breakouts for brands, generics, and specialty.  Instead, the type of market for the drug is the differentiator.  The first bucket is “drugs that are in an active market with significant rebate activity”.  Common drugs in therapeutic categories with many choices and high rebates on brands are considered in active markets.  The competition between products is driving lower prices due to market forces.

The second bucket is “drugs that currently monopolize the market but will lose monopoly in the near future”.  Payers are unlikely to realize substantial rebates on these products in the short term.

The third bucket is “drugs that are likely to monopolize a market in the long term”.  Potentially curative gene therapies would be examples of products in this segment.  If a truly effective therapy is established, Dr. Gottlieb believes manufacturers would lack the incentive to discount their product, allowing for that originator product to maintain a higher price.

Dr. Gottlieb’s proposed structure would focus on the second bucket, to influence pharmaceutical pricing and discount efforts for products where payers are unable to rely on competition to influence price.

Dr. Gottlieb’s proposal is designed to promote debate on drug pricing.  Competitive market forces for pharmaceuticals lead to lower net prices, and therefore, those products should not be the focus of new pricing policies.  While the brief article seems to indicate that the third bucket will also lack competition, we disagree and believe that manufacturers will identify these scenarios and specifically target these products to bring a competing alternative to capture market share.

Many questions are unanswered based on this brief description.

  • Who will administer the proposed new pricing process?
  • Who will decide what category each product falls under?
  • What group will create specific metrics to define the three categories?
  • What will be the basis for dictating and adjusting products between the segments?
  • How likely is it that this proposal would gain acceptance, be implemented, and have an impact?

The challenges in answering these questions will determine if Dr. Gottlieb’s proposal will provoke discussion and change in the industry or will be an interesting segmentation with no follow through.




Posted: July 2022

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