COVID-19 And The Drug Pricing Debate: Disruption Helps Industry More Than R&D
Executive Summary
CEO accountability hearing in US House shows that the COVID-19 outbreak is helping to blunt attacks on the drug industry over its pricing – just not entirely in the way the industry hoped.
When the COVID-19 outbreak disrupted all aspects of American economic and political life this spring, it was self-evident that it would impact the drug pricing debate as well.
From a simple standpoint of logistics, the overarching need to address the outbreak meant that the already limited hopes for bipartisan work on pharmaceutical pricing vanished. But the industry also entertained hopes that its extensive investment in COVID vaccine and therapeutic R&D would provide useful, real-time evidence of the importance of the industry – and maybe help voters start to think of drug companies as the good guys and not the villains. (Also see "Rapid Biopharma Response To COVID-19 Enabled By Decades Of R&D Investment, Firms Say" - Pink Sheet, 2 Apr, 2020.)
Six months later, it is clear that the politics of drug pricing haven’t changed all that much. While everyone is eager for more advances against COVID and relying on a near term vaccine approval, that has not meant an end to attacks on drug pricing.
President Trump, for one, still sees it as a winning issue for him, and continues to announce executive action in blunt terms, with the headlines no less damaging just because the underlying policy does not necessarily match up. (Also see "Trump’s Drug Pricing Plan: The Headlines Are The Goal – But Also A Threat" - Pink Sheet, 15 Sep, 2020.)
Not to be outdone, Democratic legislators returned to the issue as well, using the tried-and-true formula of a CEO accountability hearing. Six industry leaders were called to testify over two days, with questions primed by extensive analysis of internally pricing documents collected over the course of an 18-month investigation. (Also see "Six Pharma CEOs To Testify In House as Democrats, Trump Compete For Attention On Drug Pricing" - Pink Sheet, 22 Sep, 2020.)
Clearly, the industry response to COVID-19 has not stopped the attacks.
But, if the September 30-October 1 hearing is any guide, the COVID-19 outbreak has helped blunt the impact of those attacks – although not entirely in the way industry would have hoped.
The intense R&D effort behind COVID did come up repeatedly during the hearing, with Republican members of the committee frequently citing the vaccine development race in particular as an example of why Congress should avoid any action that might reduce R&D spending.
There has clearly been no movement over the course of the year between Democrats on the committee who endorse the HR 3 price “negotiation” approach and Republicans who want to paint that bill in terms of the number of new drugs that will not come to market if it is passed. The COVID R&D effort, however, is at least a fresher talking point for the GOP side of the argument and helped ensure that the first day of the hearing fell especially flat from an “attack the industry” perspective. (Also see "US House Drug Pricing Hearings Start Slow As Pharma Execs Dodge Some Punches" - Pink Sheet, 30 Sep, 2020.)
But a much bigger impact came from the disruption of COVID itself.
Every effort by Congress to probe drug pricing runs into an inherent limitation: the more extensive and detailed the investigation, the less timely and urgent the findings. Put in the hot seat, industry CEOs are often able to either disclaim responsibility (based on tenure in the job, or a change in ownership of the underlying product). And they are always far better versed in the byzantine details of pricing than their inquisitors and can therefore often ensure that dangerous attacks get lost in the weeds.
In the context of a largely “virtual” hearing, the opportunities for politicians to cut through those details and frame memorable messages is reduced even more. (Also see "Pharma Catches A Break As Democrats Stumble In Rollout Of Pricing Investigation" - Pink Sheet, 1 Oct, 2020.)
The loss of drama was evident from the outset of the hearing Sept. 30, when the witnesses were sworn in. They were directed to stand and raise their hands to take the oath – which they could be seen doing separately and remotely, and only briefly in a cluttered screenshot. That meant that the hearing did not even generate the signature image of CEOs being called to account publicly by taking the oath before Congress.
The need to recognize and unmute the committee members and then the witnesses meant frequent, brief delays that inherently reduced the energy of questioning and greatly limited the type of emotional exchange that hearing of the genre are intended to elicit. Witnesses could also legitimately struggle to see charts or images shown in the hearing room – buying time to frame answers that might have been more difficult in person.
The technology worked more smoothly on day two – which may in part explain why that day went somewhat worse for the second set of CEOs. (Also see "Amgen Shadow Pricing Of Enbrel Under Scrutiny At US House Hearing" - Pink Sheet, 1 Oct, 2020.)
But you could look in vain for any significant media coverage of the two-day event – especially when COVID-19 yet again took over the news cycle after President Trump announced a positive test.