AHIP 2017: Harvard Pilgrim, Eli Lilly CEOs talk drug prices and paying for value

Harvard Pilgrim Health Care CEO Eric Schultz offered his views on the issue of high drug prices Thursday at the AHIP Institute & Expo. (Leslie Small)

AUSTIN, Texas—The United States has a crisis on its hands when it comes to high drug prices, Harvard Pilgrim Health Care President and CEO Eric Schultz said Thursday at the AHIP Institute & Expo.

However, the solution is not to “throw out the baby with the bathwater” and stop pharmaceutical manufacturers from creating new, innovative products that save lives, he said.

That’s where value-based pharmaceutical pricing contracts with manufacturers like Eli Lilly come in, as the goal is to tie payments to efficacy of drugs.

“Does it save money at this point? It’s very modest, but I do believe there’s an opportunity down the road,” he said, noting this might be especially true for extremely pricey orphan drugs for rare diseases. “But right now, it’s about clinical outcomes.”

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Value-based agreements are especially important since there are more and more new medicines coming out for which the data that are available are not what they used to be, as the Food and Drug Administration—understandably—is striving to speed up the process of bringing innovations to market, according to Schultz.

“We believe it’s those kinds of opportunities that line up well with payment for value, because we don’t have good data,” he said.

Even pharmaceutical manufacturers see issues in the drug-pricing system, said Eli Lilly CEO David Ricks. For instance, his company is not interested in “short-term arbitrage” tied to market scarcity that has led to price hikes in treatments like EpiPens.

“We get painted with that brush; it’s not helping us—it isn’t even our model,” he said.

And while there is concern about high prices associated with breakthrough medicines and treatments, Ricks noted that ultimately, increased competition is a better answer than price controls. One example is hepatitis C drugs, for which new competitors with Solvaldi helped drive down what were initially sky-high prices.  

Schultz pointed out, however, that “you don’t need value-based contracts for everything” in the pharmaceutical realm. Ricks agreed, noting that such agreements are most effective when a significant number of members are involved and a treatment has significant medical consequences.

Harvard Pilgrim’s 12 value-based pharmaceutical pricing contracts, Schultz added, were all created when there was competition in the market for a certain type of treatment, giving pharmaceutical companies an incentive to sit down and negotiate.

“The real challenge for all of us in the industry is to believe this is the right thing to do and sit down and negotiate a value-based contract even though there may not be a competing biologic, drug, or whatever coming out,” he said. “That’s really going to be interesting to see if that emerges.”