Drug pricing is a complex and complicated area for business executives to navigate. Thus, it is a significant source of concern and stress. Not only are there the challenges of setting prices at a level to cover development costs and return a reasonable profit, but business leaders must be mindful of the ever-increasing pressure to reign in high prescription drug prices and regulatory scrutiny of their relationships with healthcare professionals (HCPs), insurers, and pharmacy benefit managers (PBMs). However, drug executives can sleep better at night by consistently applying some basic principles and practices.
Focus on the Simple
When it comes to compliance, there is a tendency to overcomplicate things. For example, we use terms and jargon like kickbacks, inducements, and remuneration when describing bribery in the healthcare context. We encounter the same regarding tracking and reporting items manufacturers provide to HCPs and healthcare organizations (HCOs). For example, there are natures of payment, transfers of value, covered recipients, and teaching hospitals.
Drug pricing is no different. For example, there are multiple types of prices: average wholesale, average sales, average manufacturer, and best price. Each has a different meaning. Therefore, successfully navigating the dangers of drug pricing requires pharmaceutical companies and executives to understand the complex web of federal and state requirements.
Setting aside the challenging regulatory complexities, navigating drug pricing starts with the simple premise that payors need an understanding of how companies determine drug costs. It is a reasonable ask, not unlike a homeowner’s need to understand the price of a plumbing or electrical contract.
Moreover, companies can avoid many issues by consistently applying three well-established and intertwined FDA labeling and advertising concepts:
· Truth and Accuracy: Like labeling and advertising, company drug pricing reports, disclosures, and statements must be truthful and accurate. These are table stakes essential to the operation of government and private healthcare programs and protecting the programs from waste fraud, and abuse (i.e., ensuring program integrity). It is one reason why both government and private payors place a heavy enforcement emphasis on these aspects.
· Avoiding Bias: When presenting drug pricing information, companies must avoid characterizations that result in misleading representations. In other words, companies must ensure that assumptions, calculation methodologies, and representations in their reports, disclosures, and statements are fair and balanced.
· Substantiation: Companies must ensure robust data support their reports, disclosures, and statements. Companies should set prices based on facts and data. It is inappropriate to set prices based simply on what the market will bear or charge an exorbitant price because one can. The prosecution of Martin Shkreli provides an instructive case study on what can happen when facts and data are ignored.
Lean on the Experts
Although the principles are familiar, implementation is another story. Simply listing all the federal and state drug pricing statutes, regulations, and guidance documents could fill a textbook before it even covers how to implement them practically and pragmatically. Therefore, drug executives seeking a better night’s sleep must listen to and rely on experts for guidance.
From an in-house perspective, at minimum, business leaders need the support of their compliance teams. Even if the compliance team lacks direct drug pricing experience and expertise, their knowledge of company culture and operations, plus an understanding of how to design and implement internal controls, can provide a robust framework for avoiding missteps. After all, the Essential Elements of an Effective Compliance Program are universally applicable, regardless of the risk area.
Likewise, business leaders should capitalize on the judicious engagement of trusted external independent pricing experts. Using such experts can augment the efforts of internal compliance teams with their specialized knowledge. Moreover, because these pricing experts work with multiple industry clients, they can provide visibility to leading practices and other compliance options. With this invaluable information, companies can create internal pricing controls and processes tailored to their needs and operations.
Conclusion
Navigating the dangers is not easy and requires executive commitment and resources. However, in the end, drug executives who “play it straight,” focus on the simple, and lean on the experts can sleep a bit better at night when it comes to drug pricing.
Seth Whitelaw
Dr. Whitelaw has 30 years of industry experience in the life sciences and healthcare sectors as an attorney, compliance officer (C.R. Bard, Inc., GlaxoSmithKline, and Misonix, Inc.) and industry consultant (Deloitte, Whitelaw Compliance Group LLC.). He also served as a compliance expert in the Opioid MDL litigation.
In addition to being a Food and Drug Law Institute (FDLI) fellow and having worked in the FDA’s Office of Chief Counsel, he has a J.D. from Washington & Lee School of Law, an LL.M. from George Washington University Law School, and a doctorate in Health Law from Widener University School of Law.
Dr. Whitelaw teaches corporate governance and compliance at Mitchell Hamline School of Law, where he is the Senior Fellow & Adjunct Professor of Life Sciences Compliance and the Legal Aspects of Drug and Device Development and Marketing at St. Joseph’s University, as an adjunct professor. He is also the former Editor of the Policy & Medicine Compliance Update.
