Miriam KalnickiMiriam Kalnicki

It starts with something that used to be routine: disclosing the list price of a new prescription medicine. But in today’s environment, that simple action can trigger a cascade setting off a corporate crisis.

Disclosing a therapy’s price has become a potential point of conflagration, because pharmaceutical manufacturers are soundly in the crosshairs of a public concerned about rising medical costs. Polling on the U.S. right and the left shows deep populist frustrations about mounting costs of care. The concerns are justified: healthcare spending has grown at greater than four percent for two consecutive years, outpacing the per capita growth of GDP. Last year, per-person spending on healthcare reached an all-time high of $5,564. As a result, the cost of health insurance is rising as well, and salary growth is not keeping pace with the rate of insurance premium increases.

O'Dwyer's Oct. '19 Healthcare & Medical PR PR Magazine
This article is featured in O'Dwyer's Oct. '19 Healthcare & Medical PR Magazine.

While the contribution of drug prices to healthcare costs has stayed relatively static in recent years, it’s one of the most routine and direct costs that patients encounter, which may be why their concerns are placed on medicine companies instead of insurers.

Real risk to business

Regardless, the risk of issues is real. When drug pricing communications go wrong, it almost always follows a predictable cascade. The issues begin with a key stakeholder group, such as a patient or hospital feeling aggrieved and unheard by the company. Frustrated patients often bring their concerns to the press, where the issue escalates, often into national visibility. As the topic draws more attention, policymakers engage, particularly given the polling mandate by American constituents. Politicians ask pointed questions—often in public—demand answers, and even convene Congressional hearings.

Once this cascade is triggered, it can be hard to reverse and damaging to business. Both the brand and the company name become linked to the public outrage over the perceived runaway cost of healthcare. As corporate reputation sinks, advocates withdraw support, investigations gain momentum toward litigation, and the stock price often suffers.

Many life science executives ask if there’s a price point or range that won’t draw risk. Our data shows that in this environment, no price threshold escapes scrutiny. Communications and stakeholder expectation setting are key. Price increases on drugs that cost less than $5,000 per month can generate as much or more national media attention as drugs launched at price points in the hundreds of thousands of dollars.

Last year, the cascade we describe above contributed to one rare disease company losing a whopping 29 percent of its market value. The therapy triggering the backlash had long been the subject of pricing speculation—even before it’s approved. When the actual price was disclosed, reporters immediately called patients and influential physicians. The rare disease community thought the price was too high and voiced their objections in social and traditional media. They generated enough attention that Senator Bernie Sanders publicly criticized the CEO. Through the course of the negative attention, the stock price fell steadily from its post-launch high.

With the heightened environment, there’s been no shortage of proposed reforms targeting pharmaceutical pricing. Some measures, such as adopting a form of international pricing referencing or putting price pressure on branded drugs by exempting those copays from deductibles, may be plausible. Others requiring drug advertising to consumers to list drug prices or enacting a single-payer, Medicare for All system are less likely in the near-term. What we can count on: continued debate on drug pricing through the 2020 election cycle!

An era of experimentation

As reforms are slow to take shape, companies and brands are developing different approaches to price disclosure. Earlier this year, members of the PhRMA trade association proactively committed to be more transparent about price information, with most participants hosting that information on brand.com. The best practice is to disclose the average out-of-pocket cost that patients are likely to pay, rather than the list price, which few people actually pay.

And yet, the conversation has already shifted from pricing to value. Three years ago, a handful of companies adopted “pricing pledges,” announcing voluntary limits to their own price adjustments. The positive attention those announcements generated did not last. Why? Halting price increases essentially reads to patients as promising to abstain from a behavior they already disliked. A more resonant message: focus on proving and paying for the value of a medicine based upon the outcomes it delivers, such as value-based contracting.

The new value communications playbook

As policy proposals evolve and media attention shifts, individual companies need a plan for value communications. Extensive planning goes into any pricing decision a pharmaceutical company makes. Just as much forethought should go into preparing a product’s value communications to a range of interested audiences.

Preparation must start early. The first step is a close examination of who the important stakeholders will be—patients and advocates, payers, analysts, KOLs and prescribers—and develop a thorough understanding of concerns and how they define value. Conducting research with primary influencers can reveal what their priorities are, who they influence, and where they are most likely to speak out. The insights uncovered in that process will indicate how we must communicate to address their priorities.

Armed with these insights, your team is prepared to create value messaging customized to these audiences’ priorities. The goal of the messaging is to communicate the value of the drug and the company’s overall contributions to what the community needs.

Through 1:1 meetings with influential stakeholders, you can begin to lay the foundational messages for the value of the therapy and begin to set expectations on price.

Risk assessments can help develop an understanding of each of those parties and their concerns, as well as identify which voices are likely to seek attention and elevate their concerns. Developing scenario plans helps your team prepare for pushback from payers or third-party groups.

Finally, the plan should include post-approval access communications. Monitoring online forums and social media channels will indicate where patients may face access challenges and can be directed to financial assistance or other support services.

The outcome of all this is consistent communications that deliver a clear understanding of what the medicine will deliver to key stakeholders for the price, as opposed to a number alone. It can be done, and it has been done. One recent launch with a therapy list price of more than $400,000 received no negative press. All media coverage of the launch included contextual messaging about value. That coverage was the outcome of a cross-functional team working on value communications 15 months before the anticipated approval date. They communicated both their intentions to ensure patient access in advance of launch and delivered fair value for payers.

In the end, all that work had value of its own.


Miriam Kalnicki is Reputation & Risk Management Strategist at Syneos Health Communications.