If all the scrutiny on drug prices has taught us anything, it’s that there are a lot of intermediate players in today’s pharma supply chain. But expect that to change, Merck CEO Ken Frazier said Wednesday.
In comments made at the Economic Club of New York, Frazier foreshadowed pharma’s “disintermediation”—a.k.a., stops on that chain between drugmakers and patients—pointing to the cable television industry as an example.
“You could actually look at the cable industry at one point where the content providers—if you were Disney, you had to pay a lot of money to get your content to the other side,” Frazier said, as quoted by Yahoo Finance, adding, “I think that’s going to happen in this area.”
The way he sees it, nixing some of the middlemen can bring down costs, and the Trump administration—which is examining the role of various participants in the supply chain—is focused on it, too.
“I think at the end of the day, I’ll just be blunt here, I just don’t understand why we live in a world where 50% of the value goes into the supply chain,” Frazier said.
As drug pricing has come into the national spotlight—aided by high-profile scandals featuring Martin Shkreli and Mylan’s Epipen, as well as commercials from once-presidential candidate Hillary Clinton and ominous tweets from Trump—drugmakers and others have been quick to point the finger at one another for costs that have soared in recent years.
Lead PBM Express Scripts has been particularly vocal about pharma’s price hikes, and it’s patted itself on the back repeatedly for introducing formulary tactics that incentives pharma to hand over discounts.
“Despite promises to limit price increases, drugmakers are trying to game the market by delaying generic competition, blocking access to safe and effective biosimilars, and coyly deferring—not cancelling—list-price increases. This is why our work to expand access and maximize value is more important now than ever,” Express Scripts said in August.
But as PBM industry critics have been quick to point out, such moves help their bottom lines without reducing costs for consumers. Industry association PhRMA has spent big bucks the past couple of years on awareness ads that seek to both educate patients on the role of different players in forcing prices up—and to encourage them to probe deeper.
“I mean no disrespect to anyone else in the supply chain, but I know how hard it is to make my 50 cents on the dollar,” Frazier said. “I have to invent something that’s never existed in the history of the world. And I have to ask my shareholders to be patient with their capital. I think that the system has got to change.”