This piece originally appeared in the Timmerman Report.
When Allergan CEO Brent Saunders announced his manifesto on drug pricing at Allergan just after Labor Day, he was met with acclaim and approval (some examples here and here). He called for a return to the social contract between biopharma companies and patients. In his view, patients understood in the past that developing drugs was risky and cost a lot of time and money, and therefore patented drugs would be expensive. Drug companies, holding up their end of the social contract, felt an obligation above simple profit-making—that drugs are supposed to keep patients healthy or to get them back to that state. That meant pricing had to take into account the public good, not just profit maximizing, and be reasonable. Moving forward, Saunders announced that, among other things, Allergan would commit to value-based pricing and to limit price increases to no more than single-digit percentage hikes per year.
These are worthy and admirable goals. But I look at other recent events and can’t help feeling his effort is doomed. Continue reading
All opinions are my own and do not necessarily reflect those of Novo Nordisk.
A few weeks ago a friend and I had the great opportunity to go see Nate Silver speak at the University of Washington. He’s a funny, engaging speaker, and for someone like me who makes his living generating and analyzing data, Silver’s work in sports, politics and other fields has been inspirational. Much of his talk covered elements of his book, The Signal and the Noise, which I read over a year ago. It was good to get a refresher. One of the elements that particularly struck me this time around, to the point that I took a picture of his slide, was the concept of the power law and its empirical relationship to so many of the phenomena we deal with in life.
Figure 1: Slide from Nate Silver’s talk demonstrating the power law relationship in business–how often the last 20% of accuracy (or quality or sales or…) comes from the last 80% of effort.
Because I spend way too much time thinking about the business of drug development, I started thinking of how this concept applies to our industry and specifically the problem the industry is facing with creating innovative medicines.