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The Great American Drug Deal: A New Prescription for Innovative and Affordable Medicines Paperback – Illustrated, January 17, 2020
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--Amitabh Chandra, PhD
Ethel Zimmerman Wiener Professor, Harvard Kennedy School of Government; Henry and Allison McCance Family Professor of Business Administration, Harvard Business School
"This book is not only a superb piece of scholarship, but a veritable tutorial on the background (1980-2020) of US drug pricing policies and practices, as well as those of the payers/health insurance industry. The book comes across as a common-sense, temperate manifesto on how biopharma enterprises can not only shape the future debate on drug pricing and health insurance/policy but also offers thoughtful remedies and perspectives. Kolchinsky's command of the material is superb. I liked the book's style - serious while at the same time digestible and almost colloquial in places. Notions such as a 'Public Domain Day' and 'Price-Jacking' were beautiful, delicious. So too was the book's repetitive illustration of the 'generic drug mountain.' Excellent."
Author, Conscience and Courage: How Visionary CEO Henri Termeer Built a Biotech Giant and Pioneered the Rare Disease Industry
"We are living in one of the most exciting periods of scientific innovation and drug discovery in history. Peter Kolchinsky steps past the headlines and simple rhetoric to take on directly the most challenging questions we face as a society in balancing the trade-offs between incentivizing and enabling the discovery of breakthrough medicines, and the responsibility we have in ensuring this is done in a sustainable way. This analysis elevates the discussion and offers new important thinking and actionable solutions that would benefit all stakeholders."
--Michel Vounatsos, Chief Executive Officer, Biogen
"What are we getting for what we spend in health care, and why? Read this book, which explains the workings of the pharmaceutical industry in plain language, dispelling myth after myth with facts, figures, and case studies. This long overdue review of industry workings, from brand and generic pricing, to what consumers pay for different products and services, to a greater understanding of what's truly just a cost versus what's an investment in the health of our country, including our business competitiveness internationally, was a joy to read. As a former practicing physician with a 20 year business career in health systems, health insurance payers, and the pharmaceutical industry, I found this to be refreshingly balanced and right on target with respect to looking at the facts as opposed to the hype. So, enjoy the read, and you'll never listen to debates on health care the same ever again."
--Ira Klein, MD, MBA, FACP
In this authoritative survey of the biopharmaceutical industry, a scientist and investor diagnoses current problems and prescribes solutions.
Kolchinsky initially trained as a virologist, but he joined the biotechnology industry later on, and ever since, he says, he's been on the "receiving end of a fire hose of knowledge." He sees his current work as a biotech investor as providing a valuable contribution, but part of his book's agenda is to state a mea culpa: "For too long my utopian view of the biotechnology industry omitted the perspective of patients who couldn't afford their medications." He then articulates what he calls the "Biotech Social Contract," describing the relationship between the pharmaceutical industry and society. This contract would have the drug industry strive to make affordable versions of drugs (as generics), and have a health insurance industry providing universal coverage to keep costs down for patients. The author then enumerates the ways in which the contract has been breached by looking at the cryptic world of drug patents; how health insurance has the overburdened sick subsidize the more fortunate healthy; and the predatory practices of pharmacy benefit managers, who, according to the author, run "a complex shell game." His main point is that although the biotech industry gets a bad rap for hunting big profits, it's the insurance industry that's the real problem; "drug companies must charge temporarily high prices for new drugs," he argues, as long as their drugs go generic in a timely manner--but insurers, not patients, should bear that cost.
This meticulously organized and extensively supported book offers a thorough introduction to the factors and politics of drug pricing. In clear, deliberate prose, the author engages with and explains a range of concepts to lay readers. Even when Kolchinsky details rather elementary principles--one subsection is titled "How Insurance Is Supposed to Work"--he never strikes a condescending or pedantic tone. It's hard not to share his ire towards insurance companies, although many readers may see his transfer of blame from the biotech industry and pharmaceutical companies to insurance providers as a self-serving maneuver. Still, his frustration with a dysfunctional system that allows patients to slip through a "patchwork of gaps" is unquestionably warranted. In the final chapter, he calls upon the biotech industry to continue linking revenue to innovation. This lacks the righteous punch of simply stating, "Let's be ethical actors," but the writer clearly knows that his industry has to uphold its end of the bargain. Kolchinsky stocks his pages with evidence, explanatory sidebars, and clarifications in regular footnotes. Sometimes, the most interesting point gets buried in the fine print. For instance, in one footnote, the author addresses a hot-button issue of the feasibility of a single-payer system. In the main text, he states that the single-payer model is "beyond the scope of this book," but he expresses a firmer opinion in the footnote: "Basically, for a country the size of America, a single-payer system is likely only appealing in theory...but would be a tragedy of human incompetence in practice."
A serious, impassioned, and informed call for change.
About the Author
- Item Weight : 14.1 ounces
- Paperback : 292 pages
- ISBN-10 : 1733058915
- Dimensions : 6 x 0.73 x 9 inches
- ISBN-13 : 978-1733058919
- Publisher : Evelexa Press; Illustrated edition (January 17, 2020)
- Language: : English
- Best Sellers Rank: #109,387 in Books (See Top 100 in Books)
- Customer Reviews:
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One of the more memorable guests was Peter Kolchinsky, founding partner of RA Capital Management, who met with the class back in 2013. Peter walked us through his journey from basic science (he has a PhD in virology) to the buy side. He could have spoken for an extra hour and no one would have moved.
Fast forward to now, and the release of The Great American Drug Deal, an examination of prescription drug pricing in the United States, in which Peter attempts to solve simultaneous equations, for medical innovation and healthcare system affordability.
The book builds off of his provocative Medium series on what he terms the Biotech Social Contract, an idealized framework where patients, through their insurance coverage, subsidize pharmaceutical innovation with premium pricing during the protected, on-patent period, after which drugs become part of an ever-growing, readily available, affordable, and accessible inventory of treatments, a public asset that compounds in value over time. Unlike new surgical techniques that patients pay for each time they are used, or physician expertise or facilities that command consistent economic rent, the growing stock of generic drugs provide a means by which the pharmaceutical and biotechnology industries can pay society back for financing the high upfront drug development costs.
Sound familiar? No? It turns out the idealized world of the Social Contract bears little resemblance to a world where even insured patients have to routinely forego needed treatment because they are unaffordable, where the structural aspects of drug distribution and reimbursement have become so convoluted and the “people over profits” incentives have long since disappeared. The social contract of 2020 is no contract at all. Insurance coverage has become one more type of payment program, one that still denies access to necessary and often life-saving treatment for those who cannot jump the copayment hurdles. The drug companies, in concert with pharmacy benefit managers, price to maximal margins, then construct a duct tape and paper clip patient assistance safety net. Premium pricing is protected even beyond patent expiration, generic drugs morph from widely available commodities to supply-constrained scarcities.
The Great American Drug Deal examines the disconnect between the idealized Social Contract and the realities of our current system, one that is often hostile to patients and results in a pharmaceutical industry vilified by those outside it. He offers a roadmap to restoring the purity of the generic drug model and thus re-establishing the equilibrium that justifies temporary market dominance: a period high prices, made affordable by insurance, followed by commoditization ever after. The book is a thoughtful and creative approach to discussion of one our most pressing and timely healthcare problems. Highly recommended.
Kolchinsky's book tackles both of those challenges head-on, explaining in approachable prose the specific ways that the system is current broken (and the ways that ill-considered legislation could, ironically, break it even worse), and avoiding the finger-pointing in favor of offering solutions.
Some of those solutions are remarkably novel (or, less charitably, pretty out-there in terms of feasibility), but the genius is that each proposal can be the catalyst for an action-oriented discussion. The success of The Great American Drug Deal (the book) doesn't require the success of The Great American Drug Deal (the idea). It only requires us to talk about it. And I hope we do.
The other masterstroke in Kolchinsky's approach is his reliance on a "Biotech Social Contract," that essentially offers the American people a deal: in return for the drug industry's ability to sell innovative medicines with minimal cost-sharing, the industry commits to allowing medicines to go generic without undue delay. This isn't necessarily the best or the only Biotech Social Contract that could be imagined, but -- again -- the true promise of the book comes in encouraging each company to develop their own version, so that consumers understand the deal that the biopharma industry is offering.
Here's hoping that we get the dialogue on this topic that we so badly need.
Through clear writing, relatable analogies, and a procedural construction of a faceted argument, Peter Kolchinsky explains and contextualizes our very complicated healthcare system, its various parts, and the highly charged drug pricing debate that threatens to undermine innovation and scientific progress. By making the system and debate accessible, he is enfranchising those impacted - meaning, all of us - to have a voice in them.
I appreciated that Peter did not just posit ideas; he also proposed solutions, and, importantly, solutions that require compromise. It would be easy to be cynical and say that Peter’s book is simply “pitching his book” (to borrow a phrase from the investment management world that he is a part of). While he clearly believes, and cogently argues, that the payer system has a unique set of misalignments that need to be remedied, he is not pointing the finger solely at the insurance industry. He recognizes that the biopharma industry has to do its part as well. Taking ownership of the narrative about the biopharma industry's value-add, as this book successfully does, is a tool that the industry needs to utilize in order to reset the drug pricing debate to a neutral position.
I enjoyed the bit of self-reflection and personal history that he interweaves, particularly in the beginning when he sets the stage by explaining how his own viewpoint has evolved from abstract idealist to tangible realist. I would have gladly read more about that personal history. I also valued some of the nuanced distinctions he makes, including expensiveness vs. affordability and what “long term” means to different parts of this system.
Last but not least, the impactful graphics provide a helpful visualization tool that supports how the written argument unfolds.
This is a book I will continue to reference and come back to.