We live in a world that has become increasingly driven and influenced by soundbites. “Discussion” and messaging of critical and important issues are frequently parlayed in 140 characters or less. This “140 ADHD” world we live in is one of the major hurdles in the drug pricing debate – it’s an extremely complex and multifactorial topic that cannot easily, or more so accurately, “sound-bited”.

In our original deck of 90 slides (link) published in November 2016, we attempted to provide a “take-home” summary of the tomb within the first 17 slides. But, many of our readers still required an “upping of the Aderall XR dose to 60mg” to get through those summary slides. With this in mind, we provide a 140 character summary for each of the key take home slides.

PS: In the spirit, and infusion, of “don’t hate the player, hate the game” and “if you can’t beat them join them”, MTS is now on Twitter – follow us @MTSpartners. To be added to the mailing list for future Strategic Advisory Analytics reports, please email liranzo@mtspartners.com

We published our first “Strategic Advisory Analytics*” report “Principled Drug Pricing Centered on Innovation and Choice: Part 1” (link) in November 2016. As we highlighted at the time, the principal purpose of the report was to act as a forum for debate on this important contemporary societal issue. With this in mind, we continue to communicate the key feedback items following our continued interactions with both investors and corporates. Feedback #1 related to the likely impact of the new administration on drug pricing (link), #2 related to the impact of drug price rises (link), #3 related to the frictional costs in the US drug ecosystem (link), and #4 focused on orphan drug pricing and its perceived immunity from the drug pricing debate (link).

*MTS Health Partners is an investment bank dedicated solely to the healthcare industry. Our practice distinguishes itself by providing experienced, attentive and independent counsel, and expertise in the context of long-term relationships. Our “Strategic Advisory Analytics” reports exemplify our value add strategic advisory services to clients across all healthcare industry sub-sectors.

MTS Drug Pricing Report “Twitter-ized” (all slide numbers refer to those in the original deck – link

  • Slide #4: MTS report constructed on three pillars: (1) global proprietary #data (2) description of US and comparable developed world #drugpricing ecosystems (3) suggestion and review of possible outcomes.
  • Slide #7: A critical mass of trip wires has been hit, #drugpricing debate not going away. US #drugpricing ecosystem is near breaking point and WILL undergo significant changes.
  • Slide #8: Based on proprietary MTS #data and description of US and ex-US drug ecosystem, we propose 3 key solutions: (1) #valuebased #drugpricing (2) increased transparency and concomitant lower frictional costs (3) choice in Rx element of insurance.
  • Slide #10: Average US person spends on #drugs per year ~$1050 (or 2% GDP) vs. ~$550 (or 1% GDP) for comparable developed world (CDW).
  • Slide #11: The average #listprice vs. #netprice (i.e. gross to net) for branded drugs has increased over last 10 years from 15% in 2006 to 27% in 2015.
  • Slide #12: The list price for branded #drugs in US is on avg 3.04x more expensive than in CDW. #Rebates bring it down to a net price of 2.1x.
  • Slide #13: Aggressive #drugprice increases are unique to the US free-market based #pricing ecosystem. The average price rises/CAGR since launch is 70% and 7.3% CAGR for branded drugs.
  • Slide #14: US #healthcare is individualized vs. CDW socialized medicine; US #healthcare ends in fragmented insurance based system.
  • Slide #15: CDW drug pricing ecosystem = “BID” system with “explicit” cost/benefit assessment at point of pricing, so #listprice = #netprice. US = “OFFER” system with cost/benefit assessment by PBM’s, so #listprice ≠ #netprice due to #rebates.
  • Slide #16: PBM’s have become surrogate gatekeepers in cost/benefit assessment of drugs but they increase #frictionalcost and create a fundamental #conflictofinterest.
  • Slide #17 and 18: Money flows in the US drug system = For every $100 of list price drug sales, consumer pays $88, #biopharma gets $73, Wholesalers/Pharmacy get $4, #PBMs get $8 and Insurers get $3.
  • Slide #20: For every $100 drug sold #biopharma spends $80 to make $20 (25% return); #PBMs spend $4 to make $4 (100% return).
  • Slide #21: MTS’ view on the three key issues: (1) US #drugprice not based on cost/benefit (2) lack of transparency (3) high #frictionalcost.
  • Slide #22: MTS key actionable view point #1: biopharma industry should move to “innovative value based #drugpricing”
  • Slide #23: MTS key actionable view point #2: increased #transparency and choice in the Rx element of the US insurance system based on cost/benefit. #drugpricing #tieredRxinsurance

We welcome comments and questions to the coordinating author, Ravi Mehrotra (mehrotra@mtspartners.com) and/or to any of the Partners at MTS.

For media inquiries please contact Argot Partners:

Andrea Rabney

Eliza Schleifstein

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