Rightsizing Drug Distribution to Improve Value

Ted Okon, MBA: The academics that talk about this come from the institutions that are paying, in many cases, 50 cents on the dollar or less. Yet, it’s not the patient who’s getting the benefit of that. It’s the patient who’s calling in to Alan’s organization to basically say, “I can’t afford this drug. I’m making the trade-off between getting this drug or getting my next bunch of groceries.”

That’s a problem. It’s obviously not just 340B. We’ve expanded the Medicaid program—that’s great, more people are covered. But, the Medicaid discounts factor in, as well. It’s very elusive when you talk about the price of a drug being $100 or $100,000—whatever the case may be.

James Gilroy: It’s a really important discussion that goes back to the initial question that led us here—how do the different stakeholders define value? I think, as an innovative pharmaceutical company, we would define value as the innovation that we are bringing to the marketplace. When referring back to the initial equation of quality over cost, you know that innovation is not necessarily only breakthrough innovation, but in some cases, incremental innovation, is just as important. This goes back to the point I made earlier around understanding the value of that particular innovation over time.

When it comes to the price that someone actually pays for a drug, I think that when we consider this as a pharmaceutical company, we think of how many hands are ultimately touching that product across the value chain before it ultimately makes its way to a patient. I’ve heard anywhere from 10 to 30, right? So there’s a number of other actors within the particular space where there’s opportunity for margin. There’s opportunity for added value, as well. I think we need to figure out how to “right size” what we pay for those various services along the value chain.

Our CEO recently published, in The Wall Street Journal, some of the statistics we were just talking about—67% of that drug is ultimately paid within the commercial marketplace, and an average of around 19% of that price is actually paid within the government space, when you consider all of these additional components once the product ultimately makes it to the patient.

So we need to “right size” some of that. No doubt, there are some bad actors on the pharmaceutical side as well. There’s been some, as of late, that have gotten quite a bit of press, but, I do ultimately believe that for the most part, innovative pharmaceutical companies are looking to price medications based on that value that they ultimately bring to the marketplace.

Ted Okon, MBA: I think everybody has a responsibility, because this is about value that’s delivered. I’ve said it publicly—community oncology is part of the problem. Community oncology has to be part of the solution, and I think that’s inherent in the Oncology Medical Home and some of the things that we’ve tried to do.

Ira, Mike, and Alan have been involved in terms of defining quality and value. We have a responsibility. I think that the drug companies have a responsibility in terms of, literally, value. I know there are impediments that stand in the way. ASP [average sales price] is an impediment. Best price on the Medicare side is an impediment. They have to come down, but drug companies have a responsibility. I think the same holds true on the payer side of it as well. I think it definitely holds true on the large health system side, and even the mid-hospital side, that has, for example, 340B discounts. We’re all in this together. It’s not just about the drug, it’s about the total pie that incorporates all of the component costs of cancer care. We all should be thinking about being measured on value (everyone involved). I also think the patients have a responsibility. We all should be measured in terms of value.