Life Science Compliance Update

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May 09, 2017

Biotechnology Investors Beware?

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One thing the pharmaceutical stock industry has seen over many decades is price sensitivity to small statements and comments made by those in the public eye. Recently, Jim Greenwood, President and CEO of the Biotechnology Innovation Organization (BIO), authored an article on Medium about why those working and investing in the biotechnology industry should not be concerned, industry is on a successful path forward.

Greenwood noted that while investors do not do well with uncertainty, there is now more stability and less of a likelihood that biotech markets will radically move with a just one press conference or interview.

Greenwood also refreshed our memories about the BIO “Value Campaign,” which has two goals: (1) to cultivate political allies and (2) to change the conversation on price to a conversation on value. BIO wants “people to understand that biotech companies do more than manufacture pills and biologics. They offer the most precious thing of all: more time to spend with our loved ones.”

The fact that Donald Trump wants to bring down drug prices has been made evident. However, Greenwood notes that the biopharmaceutical industry shares that goal, but believes that rather than add restrictions and regulation, a greater emphasis needs to be placed on the free market. He has seen the success of diverse CEOs who spend their time gathering information, from a variety of sources, and the correct calls they wind up making.

Greenwood notes,

For instance, some counseled the President to put at the helm of the Food & Drug Administration a leader who might take a radically different approach to drug approvals. Others advised him that it’s critical for patients and innovators for the FDA to remain the global, gold standard. The President has since nominated Scott Gottlieb, who believes we can have meaningful regulatory reform without compromising on safety or efficacy. President Trump has chosen known entities and strong free-market reformers to lead FDA and the Department of Health and Human Services. This is actionable intelligence for investors, far more so than any single Tweet or quote. There’s a saying in Washington that “personnel is policy.” Savvy investors who’ve studied the positions and credentials of President Trump’s key personnel choices are rightly confident about placing bold bets on biotechnology stocks.

Just the Facts, Ma’am

Greenwood goes on to discuss the PR gambit insurance companies and the media have partaken in, wherein they unleashed a torrent of media attacks against drug makers, enlisting universities and think tanks to help them. Patients, unfortunately, have fallen for this nonsense. They pin the fact that the insurance company is refusing to cover their medicine, thereby increasing co-pays, on the drug company instead of the insurer.

However, the national share of health care spending on medicines remains the same today as it was fifty years ago – roughly ten to fourteen percent. Greenwood notes that insurers spend a lot of time pointing the finger at industry for rising premiums, but that is not true. About 75% of insurance premium growth is driven by increasing payments to hospitals and doctors – only 17.7% of premium increases in the ACA market come from prescription drug costs.

This degree of cost-shifting is not happening in other sectors of health care. Patients have to pay just four percent of their hospital bill, on average, but insurers make them pay a cost-sharing percentage five times greater for their medicines.

Greenwood then attempts to set the record straight, noting:

First, drug companies don’t set patients’ out-of-pocket costs. Insurers do. Second, rising drug prices are not the real driver of health care costs. Medicine keeps people out of hospitals and doctor’s offices, which are the primary cost drivers.

Greenwood concludes by mentioning the roll out of www.drugcostfacts.org, a portal filled with facts (each with multiple sources), with information changing regularly, depending on what is being debated in Congress.

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