EP300: Getting the Right Drugs Developed and Thinking Different About How to Pay for Them, With Bruce Rector, MD

Wow! It’s episode 300. That’s a milestone. Because of you, we’ve grown to be one of the largest podcasts for health care executives—so, thank you to every one of you who has recommended the show to your friends and colleagues, which is really the highest compliment. Thanks also to all the listeners of this show who have written reviews, LinkedIn posts, and sent emails. The team over here at Relentless Health Value really appreciates your kind words. They’re super motivating.

The emails we love to get are the ones where one of you talks about a success story, like an example where you’ve taken something you heard and made it actionable—how you helped patients get better care to lower cost or how you were able to collaborate with fellow stakeholders in a meaningful way. That’s really why we’re here and why it’s so motivating to hear stories like this, which brings me to a really important point. We’re in this together. All of you health care decision maker/stakeholder types out there, you who can directly effect change, it’s really you who deserve the biggest round of applause, if I do say so. We appreciate the opportunity to kick off the activity or the decision making, but it’s you all who pick up the ball and run with it. And for that, we—as both professionals and patients—thank you.

Moving on to today’s episode 300, my guest in this health care podcast, Bruce Rector, MD, is an expert on drug affordability; and he has extensively studied how to make sure we get the right drugs developed by considering innovation incentives among other things. He’s done a lot of work with Doctors for America and the Center for American Progress. He also teaches medical students, pharmaceutical policy, and has worked with drug companies on drug development promotion. So, I felt like that was a pretty rounded perspective of the issues that I wanted to get into here.

Let me tell you why I started to think about this. Any one of those stories where somebody dies of an infection that was resistant to antibiotics, they’re always ghastly tales that seem so unnecessary. And every time I hear one of them, I wonder why pharma companies aren’t in the antibiotic business. Clearly, there’s a need.

Well, it turns out antibiotics are a great case study of what happens when drug companies don’t have the incentive to develop drugs that are a huge need to society—which brings me to the big hairy challenge I’m talking with Bruce Rector about in this podcast. How do you ensure that pharmaceutical manufacturers are fairly incented and compensated to develop the drugs that are of the most value to society?

Orphan drugs, by the way, are a great example of what happens when incentives are put in place to develop drugs. At last count, half the drugs developed in the past decades have been for rare diseases—because of the 1983 Orphan Drug Act that made it quite profitable to develop for rare diseases.

So, in this health care podcast, we dig in to two—arguably three—categories of incentives that are typically offered or available to pharma companies in this country today and which are, frankly, used in that Orphan Drug Act. The first two are push incentives, and then there’s pull incentives.

Push incentives are when the government, generally, offers incentives to reduce industries’ costs during the R&D (Research & Development) stages, like they give grants or tax credits for clinical research—things like this. Pull incentives, on the other hand, are ways to guarantee demand after the drug is developed or to help the pharma company make more money on the drug, for example, by extending patent exclusivity—like if you, Pharma, develop this drug, we’ll promise to buy millions of doses right up front and/or we’ll bar any generics for two extra years so you get the two extra years of revenue. (You might be thinking about what’s going on with COVID right now. Just sayin’.)

So, we have push incentives, we’ve got pull incentives, and then this last one, which is more of a market condition than really anything paid up front or deliberately engineered on the back end. It’s that drugs aren’t like new desk chairs or some other product that, if the price goes too high, your employer just doesn’t buy it. If someone is suffering from a deadly disease and there’s one drug for it with no competition, there’s nothing and nobody in the US marketplace that really has the power to hinder the pharma company from basically charging whatever they want for it. Dr. Vincent Rajkumar talks about this in EP296 if you want to go back and listen to that one for more info.

But wait … there’s more I talk with Dr. Rector about in this health care podcast. He brings up two different ways to contemplate paying for drugs. First is the fire extinguisher model, which is really applicable to antibiotics—and we talk about a couple of things I had never thought about relative to antibiotics. And then secondly, we have the subscription model—definitely food for thought for any of you innovative health plan types or policy makers out there.

You can learn more by following Dr. Rector on Twitter and LinkedIn.

Bruce Rector, MD, is physician whose work spans many important areas of the health care landscape: biopharmaceutical policy advisor, health policy lecturer, life science company consultant, and physician advocate. He focuses on policies to ensure that the right drugs get developed to meet society’s needs and that they are value based and equitably priced.

Dr. Rector coauthored an article on value-based pricing, “Grounding Value-Based Drug Pricing in Population Health,” which is published in Clinical Pharmacology & Therapeutics.

05:58 What’s the issue with innovation in the pharmaceutical space?
06:47 “The problem … everyone talks about is antibiotics.”
07:38 What are pharmaceutical companies launching to drive value instead of antibiotics?
08:21 What are orphan drugs? And why is development incentivized for those drugs?
11:56 What are the differences between push incentives and pull incentives?
14:37 “The pharma company is all about how much money [the drug] can make once it hits the market.”
16:28 “These contracts, they know once they hit the market, there’s billions just waiting for them.”
17:17 What are the biggest pull and push incentives in Pharma?
17:40 What are the push and pull incentives with antibiotics?
24:39 What’s the fire extinguisher theory in Pharma?

You can learn more by following Dr. Rector on Twitter and LinkedIn.