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Pharma and Volume-to-Value: The Big Throwdown

Joe FlowerThe collision between the “volume-to-value” movement and the pharmaceutical and biotech industries over the next few years will have a powerful impact on them and on the healthcare industry and on us as customers, patients, and payers. 

On the one hand, pharma is perhaps the part of the healthcare industry least exposed to direct price regulation under the Obama reforms. The actual costs of pharmaceuticals have been rising as a percentage of what people spend on healthcare, and are seen as the part they have the least influence on. At the same time, many new drugs for cancer and other life-threatening diseases have come with astonishingly high price tags, often not fully covered by insurance (due to the high deductibles and co-pays of the new plans), and with few ways for regulators or the market to push back on them. The public perceives these huge price tags as threatening people with a Hobson’s choice of bankruptcy or death. In the volatile political atmosphere of the 2016 elections, this leaves the pharmaceutical industry highly exposed to political attack and actual new price regulation.

On the other hand, the pharmaceutical and biotech industries also potentially offer some of the best answers to bringing the cost of healthcare down through the use of personalized medicines, smart medicines, new methods of administration such as implants, as well as the possibilities glimmering at us from recent research of real breakthroughs in such important chronic disease areas as Alzheimers, diabetes, addiction, behavioral medicine, and functional medicine. For the most part, though, these answers remain potential. We will not see them adding to the “value” side of the equation until they become fully integrated into a system that is at risk for the health of its customers and using every trick in the handbook to bring those costs in line.

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