Rapid biomedical progress is not inevitable, Pops says

Alkermes CEO Richard Pops warns that price regulation, PBMs and FDA policies could slow transformation of science to medicine

Scientific advances are a prerequisite for rapid biomedical progress, but a strong regulatory and public policy environment are essential for transforming those advances into medicines, Richard Pops, chairman and CEO of Alkermes, said in an interview with The BioCentury Show.

Pops, a past chairman of BIO and current member of the boards of BIO and PhRMA, said the biomedical ecosystem is “special and fragile,” and he expressed concerns that it is being harmed by legislation regulating the prices of drugs, the business practices of pharmacy benefits managers (PBMs), and FDA’s policies on accelerated approval and advisory committees.

The Inflation Reduction Act (IRA) is shifting the “allocation of resources within biomedical research toward biologics,” and to single-indication treatments for rare diseases that will not be subject to the law’s price negotiation provisions, Pops said. “That’s a direct consequence of legislative decisions that were made that will have a long tail, a tail that will be measured probably more on the order of a decade than on the order of a year.”

One of the consequences, he said, is “there will never be another Keytruda” pembrolizumab, the PD-1 inhibitor from Merck & Co. Inc. (NYSE:MRK) that has been approved to treat multiple types and stages of cancer.

“To the extent that people are making small molecule oncology drugs, they’ll probably be relegated to use later in the evolution of the disease,” Pops said.

Another of the unintended consequences of the IRA is to give big pharmas greater leverage over small biotechs, Pops said.

Describing the opportunity for “valuation arbitrages,” he cited the example of a small publicly traded biotech that is developing a drug that could be approved for several indications. Because the IRA limits the period in which a company can market a drug before it is subject to price regulation, the company may only be able to develop it for one or two of these indications. On the other hand, a big pharma would have the ability to “deploy more capital earlier in the development program,” gaining approval for more indications prior to Medicare drug price negotiations. That means the drug is worth more to the pharma than it is to the small company.

As a result, large pharmas are “going to be buying those companies every time” they get the chance, Pops predicted.

The need to justify prices

In the three decades since he became CEO of Alkermes plc (NASDAQ:ALKS), one of the biggest changes in the commercial landscape has been the increased power of PBMs, Pops said. He attributed PBMs’ power to market consolidation; three companies control over 80% of the market.

One of the results has been an increase in the rebates drug companies must pay to get drugs on formularies from “minuscule levels” to 40-60%, Pops said. Another consequence is a dramatic increase in the number of drugs that are excluded from formularies, he added.

Both high rebates, which aren’t passed on to consumers, and formulary exclusions hurt patients and drug manufacturers.

There is a lack of political will to reform the PBM business model, and to address other threats to biomedical innovation, because public sentiment has turned against the biopharmaceutical industry, Pops said. “There are not a lot of people lined up to support the pharmaceutical industry right now out of this belief that the pharmaceutical pricing is too high and the profits are too high.”

These perceptions are driven by the industry’s failure to justify prices in ways the public finds credible, Pops said. “When you decide as a manufacturer and innovator to price a product at a price, I think it’s incumbent upon you to explain why you priced it there.”

On the regulatory side of the equation, Pops called on FDA to defend the accelerated approval pathway, saying that it is a vital tool for getting transformative medicines to patients.

Pops called for changes to advisory committees that would make it possible for FDA to recruit qualified members. He also said FDA should use the committees to obtain scientific and medical advice, and not ask them to render snap judgements on complex regulatory questions.

The BioCentury Show is sponsored by the BioCentury-BayHelix East-West BioPharma Summit, which takes place in Cambridge, Mass. Oct 2-4.  For information on how to sponsor The BioCentury Show and the BioCentury This Week podcast, please contact Sarah Shoaff at sarah.shoaff@biocentury.com.