Scott Gottlieb, the Trump administration's FDA commissioner, generally gets a big thumbs-up from the pharmaceutical industry. But he may end up making some drugmakers unhappy.
An ex-FDA official, physician, industry consultant, and biotech investor, Gottlieb is seen as industry friendly and was certainly preferable to some other less experienced and more extreme candidates the White House floated. But he seems to have a mandate that includes getting drug prices under control -- a topic he mentioned in his initial remarks to FDA staff on May 15.
President Donald Trump, meanwhile, has gone from terrifying the pharma industry with pricing criticism to increasingly conspicuous silence. A White House budget plan released Tuesday essentially ignored drug pricing.
Gottlieb's focus seems to be on bringing prices down by increasing competition. That's going to help some pharma companies. But competition is only good when you're on the right side of it.
The FDA has a limited mandate when it comes to drug prices. Anything it can do would be small potatoes compared to letting Medicare negotiate drug prices -- which was a Trump policy aim at one point. But the president has clammed up about that proposal and on prices in general.
Gottlieb's speech mentioned some ways the agency could bolster competition and get cheaper drugs to patients. They include being more flexible about drug approvals, getting generics to market more quickly and boosting competition for complex drugs. He has also previously advocated a quicker path to market for both new and generic drugs.
The budget echoes another Gottlieb proposal pharma loves: loosening a prohibition on drugmakers sharing data with insurers before drugs are approved. That could help firms get greater market access for new medicines more quickly.
Such steps would favor companies with a strong portfolio of new medicines on sale and in the pipeline. They will benefit most from a faster approval process for new medicines and the expanded use of existing products. And if pre-approval talks with insurers lead to better drug launches, then these firms will reap outsize rewards.
Drugmakers that rely too much on older and competition-prone medicines may be less thrilled with a new-look FDA. They will be hurt disproportionately by faster generic approvals, and by any targeting of the legal and regulatory tactics companies use to preserve drug sales as long as possible.
That firms with newer and growing drugs tend to win out is nothing new. But Gottlieb's plans would amplify the rewards of being on the right side of that spectrum, while worsening the pain of firms with aging assets.
A subset of companies that might be in extra trouble are those that rely on expensive biologic medicines -- complicated drugs made with living cells rather than via chemical processes. These are some of the best-selling drugs in the world, but have faced little or no generic competition in the U.S. Long-lived patents account for some of that, but these drugs are also trickier to replicate.
The process for getting a so-called biosimilar approved and on the market is substantially tougher than that for a regular generic. And the small number of biosimilars that have made it to market are not as easy to substitute for the original product. Gottlieb's speech specifically cited getting biosimilars to consumers as a priority. If he speeds up the process, then that will have a major impact on some blockbuster drugs.
The biggest loser in this regime may be specialty pharma -- companies selling expensive medicines they don't typically develop in-house. These firms often focus on older and more obscure products. They've also become notorious in recent years -- thanks to the prominent troubles of companies such as Valeant Pharmaceuticals International Inc. -- for raising prices dramatically. When you've got a small or declining market for a medicine, it's the one way to generate growth.
Many of these firms have already had a rough couple of years due to criticism of their pricing practices, crackdowns from private payers, and an overall uptick in generic approvals.
If Gottlieb targets firms that have "inappropriately gamed" the generic drug process to preserve sales for their older medicines, then specialty pharma firms are likely to face a particular pinch.
Trump might just be off the drug pricing warpath temporarily because he has a few other things on his mind. But until he comes back, it makes more sense to watch Gottlieb to gauge the administration's temperature on drug pricing.
This column does not necessarily reflect the opinion of Bloomberg LP and its owners.
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