Binary thinking won’t promote progress

This piece is the first in a series exploring the foundational players in the U.S. healthcare system: payers, providers, policymakers, and the pharmaceutical industry.

Ever since Bill and Hillary Clinton advanced healthcare reform in the first term of the Clinton administration, the debate about how to improve access and affordability has been politically fraught and full of pejoratives. Everyone comes to the table with opinions and preconceived notions, many of which go unchallenged.

In my classroom, I encourage my business school students to look beyond headlines, rhetoric, and reductive soundbites. Tropes like “All that insurance companies care about is profits” and “Doctors don’t understand business” are simplistic and do a disservice to patients trying to navigate a profoundly complex system while maintaining their health, dignity, and humanity.

In my nearly 30 years in healthcare — as a physician, executive, educator, and founder — I have worked in almost every corner of the system. Here is what I have found: most people who work in the healthcare industry, from the well-compensated insurance exec to the pharma salesperson, are mission-oriented. They want to positively affect people’s lives; they care deeply about finding and facilitating cures, and they certainly do not want to keep patients from accessing preventive or life-saving care.

It is the system in which these individuals operate that is flawed, not the people themselves.

In this editorial and those that follow in the series, I will look at the four p’s — providers, payers, policymakers, and pharma – and their place within the system. My goal is to uncover solutions that will improve the U.S. healthcare marketplace for all the players in it, especially for that fifth “p”: patients.

Let’s start with the pharmaceutical industry.

Fact: The U.S. Pharma Industry Is a Global Engine of Innovation

“Pharma is evil.”

Have you heard this trope? I cannot tell you how many times I have heard it. And, I will admit that when reading stories about the cost of insulinopens in a new tab or window or other drugs, there have been times when I thought it as well.

But here is the truth: the U.S. leads the world in clinical researchopens in a new tab or window and healthcare innovation. This outcome is not an accident. It is because these companies work hard to advance cures.

According to a study released last yearopens in a new tab or window by Amitabh Chandra, PhD, a professor at Harvard Business School and the Harvard Kennedy School of Government, global biopharma research and development (R&D) investment totaled $276 billion in 2021, including a significant portion from the U.S. Over time, these investments have yielded transformative therapies, from immunotherapies in cancer to mRNA vaccines for COVID-19, to cures for hepatitis C, to groundbreaking treatments for rare genetic diseases. They have turned once-fatal diagnoses into manageable chronic conditions and extended, even saved, millions of lives.

For example, in the early days of the COVID-19 pandemic, we witnessed the industry’s capacity for rapid innovation in the U.S. Vaccines that would traditionally take a decade to develop were researched, tested, and distributed within a year due to unprecedented partnerships between industry, government, and academia. This example illustrates the best of what pharma can offer: coordinated action, rigorous science, and life-saving solutions.

Beyond innovation, the pharmaceutical industry also makes a substantial economic contribution. It supports more than 4 million U.S. jobs opens in a new tab or windowand contributes hundreds of billions to the national GDP. Entire communities depend on it — not just for medication, but for employment, research opportunities, and economic stability.

Given their work and ingenuity, Chandra emphasizes that pharma companies are, by and large, not exactly raking in the dough. In a webinar mentioned by R&D Insightopens in a new tab or window, Chandra argued, “This is not some super-profitable industry,” and pointed out that net income margins are around 15%, comparable to public utilities.

The Darker Side: Cost, Complexity, and Mistrust

I believe the pharma industry, and the vast majority of players in it, are not evil. But criticisms of the industry also are not baseless.

In the U.S., drug prices are much higher than in other countries. Essential medications, from the aforementioned insulin to asthma inhalers, are unaffordable for many Americans, leading to skipped doses, delayed treatments, or worse.

If that outcome is not due, as Chandra says, to exorbitant profits, why is it?

The complexity of the system is to blame. Pharmaceutical companies set the initial list price of their drugs, but then a byzantine system of rebates, discounts, pharmacy benefit managers, wholesalers, and insurers kicks in. Most of these policies are set by entities operating behind closed doors. This opacity makes it nearly impossible to understand the true cost of a drug, much less who is responsible for it. Pharma is often the easiest-to-explain scapegoat.

That said, the pharma industry engages in some questionable practices of its own that, while legally permissible, do raise ethical concerns. “Evergreeningopens in a new tab or window” strategies — making small, incremental changes to existing drugs in order to extend patent life — can delay the introduction of cheaper generics. “Pay-for-delayopens in a new tab or window” deals, in which brand-name companies pay generic manufacturers to postpone launching a competitor drug, do prioritize profits over patient access.

And of course, the role of certain companies in fueling the opioid crisis cannot be overlooked. Aggressive marketing tactics, suppression of addiction risk data, and relentless sales targets contributed to a public health emergency that we are still trying to contain. These practices erode public trust and obscure the very real and positive contributions of the industry.

Toward a More Balanced Future

So, is pharma the problem or the solution? The answer, as with most things in healthcare, is both.

The U.S. pharmaceutical industry is part of the problem in that it contributes to unsustainable drug pricing, exploits regulatory loopholes, and sometimes prioritizes shareholder value over public health. But it is also an essential part of the solution, leading the world in life-saving innovation and powering the next generation of therapeutics. Binary thinking — pharma is evil or pharma is our savior — prevents policymakers from addressing real issues: a fragmented payment system, regulatory lag, lack of transparency, and misaligned incentives across the ecosystem.

Innovation should be rewarded, but not at the expense of access. And profit motives can drive breakthroughs but should be balanced with public accountability.

What does a more balanced future look like?

*Transparency in pricing: Patients, providers, and policymakers should be able to understand how drug prices are set and where the money goes.

*Regulatory reform: Closing loopholes that delay generic drugs and revisiting patent laws would help improve access while preserving innovation.

*Value-based pricing models: Paying for drugs based on outcomes, rather than volume or exclusivity, could better align incentives.

*Continued investment in neglected areas: Antibiotics, maternal health drugs, and global health medications are hungry for attention and funding, even if the profit margins are lower. Pharma companies could go a long way in repairing mistrust by investing in underserved areas.

*Better public-private partnerships: COVID-19 showed us what is possible when government and industry collaborate with urgency and purpose.

*When it comes to solving the problem of high drug prices, we need to elevate the conversation. If we reduce entire sectors of healthcare to villains, we stop looking for solutions.

And we all suffer.

N. Adam Brown, MD, MBA