Political and Ethical Dilemmas Facing Bio/Pharma Companies in a Global Marketplace

April 10, 2017

Pharmaceutical Technology spoke with Ben Locwin and Tom Fox ahead of their CPhI North America presentation to discuss drug pricing, compliance challenges, and corporate social responsibility in the bio/pharmaceutical industry.

BioPharm International spoke with CPhI North America presenters Ben Locwin, PhD, MBA, MBB, president at Healthcare Science Advisors, and Tom Fox, principal at Advanced Compliance Solutions, to discuss drug pricing, compliance challenges, and corporate social responsibility in the bio/pharmaceutical industry. To hear more about these and other related topics, attend Locwin and Fox’s upcoming presentation “Legal and Policy Strategies for Drug Companies in Today’s Global Market” at the inaugural CPhI North America to be held on Wednesday May 17, 2017 from 10:30 am to 12:00 pm.

Drug pricing and the new administration

BioPharm: Recently, there has been a lot of discussion on drug pricing. With a new presidential administration, what kinds of policy changes do you expect to see over the next four years? How might this impact pharma manufacturers?

Locwin: Certainly, the antecedent factor in manufacturing and pricing will be if indeed the new White House administration is successful in systematically reducing regulations by FDA on drug discovery, clinical development, and production. Strategic pricing of pharmaceuticals is based in part on the following factors:

  • Regulatory burden

  • Manifestation of failure probabilities to meet safety and efficacy standards

  • Likelihood of amendments to processes and products.

Potential changes to the rules, therefore, necessarily changes each of these variables, and thus, overall manufacturability and pricing.

What is incumbent more than ever on manufacturers, because of public perception, is to be able to justify costs based on the inputs. Certainly, drug prices can be arbitrarily set high-It can be done, but should it be done?

Fox and Locwin: There are quite clearly ramifications to this, and being transparent about processes that lead to pricing makes some of these ethical quandaries a bit easier to defend-if not in front of Congress or FDA, then certainly in the court of public opinion. It's a business risk and so this should be appropriately reflected in a good risk-management process.

Optimizing compliance programs  

BioPharm: FDA issued an increased number of warning letters in 2016. What are some of the most common compliance challenges pharma manufacturers are facing?

Locwin: There's a strong misconception behind this statistic: A single elevated data point (2016 having a greater number of warning letters than 2015) doesn't mean that there's been an appreciable change in poor quality coming from the industry, it's only indicative that repeated measurements of a particular data source (e.g., number of annualized warning letters) will necessarily show natural variation. Number of inspections, FDA funding, and many other factors are components of this number; it speaks more to the variation in the underlying processes involved in inspection than it does in the goodness of drug manufacturability.

Fox and Locwin: Good compliance is taking regulatory pronouncements and putting them as part of a compliance program, taking seriously the nature of the articles within the regulations, and determining best how to operationalize them.

Fox: A key indicia of an operationalized compliance program is the extent to which compliance professionals and risk managers incorporate regulatory information directly into corporate risk-management processes and compliance programs. Information provided in FDA warning letters can relate to specific issues and provide insight into how FDA will assess risks. The issues raised in FDA warning letters can be used as the basis for updated and enhanced employee training to drive the message into the fabric of an organization.

Corporate social responsibility

BioPharm: A section of your presentation will focus on separating business from ethics and morals. How difficult is this for pharma companies? What kinds of challenges do you see them facing?

Locwin: We need to realize that pharma companies are for-profit entities, so even though the overwhelming stance is to be in the business of helping patients (as their taglines variously go), it has to be financially favorable, lest the company not continue to exist. But in any case, when businesses do corporate social responsibility better, corporate financial performance tends to improve as well. This makes thought experiments like the Heinz Dilemma, even more important for pharma than for other industries: if drugs price out too many patients, they aren't on average providing the benefit they could.

Fox: Rather than focus on separating ethics and values, I think the question should be, how do you incorporate your corporate values into your business ethics? Corporate values should be a driver of business and a market differentiator from your competition. Compliance is the corporate function which puts processes and procedures in place to operationalize your corporate values and business ethics within the risks inherent in an industry regulatory regime. A robust risk management process allows a company to more efficiently manage its risks and at the end of the day, make the company more profitable. It is linear progression, not binary decision between morals and ethics.

What to expect at CPhI

BioPharm: What will participants learn during your CPhI North America session?

Locwin: Enough to be dangerous on a number of topics. Our track will discuss the backbone and underpinnings of drug pricing, ethical dilemmas that exist as a result, and how compliance is an irreducible component of doing all the work properly.

Fox: [Our presentation will also discuss how] a robust risk management process allows a company to be more nimble, agile, and able to more quickly respond to market conditions going forward. Through operationalizing compliance, a company can embed the risk-management process closer to the business unit and into the business process.