SAN FRANCISCO – Amid all the dealmaking and financing talks at this year's Allicense meeting, one topic continually returned to the surface: the increasingly dicey area of reimbursement.

One has had only to follow the market trends of the past couple of months, watching as Gilead Sciences Inc.'s stock led the sudden downturn, with many industry observers attributing that to criticism of the pricing of hepatitis C drug Sovaldi (sofosbuvir) and uncertainties in the reimbursement space. That stock swoon occurred despite the fact that Gilead had just come off the "single most successful drug launch in the history of the planet," said Roger Longman, CEO of RealEndPoints, during Wednesday's opening keynote.

The pressure from payers is adding another level of drug commercialization. A few years ago, companies were concerned with just getting the drugs approved and getting them out to physicians who would prescribe to patients. But now payers are working in concert with physicians, "and that is a huge issue for you guys," Longman told the room of biopharma execs.

"You can't just go to physicians and talk about safety and efficacy," he added. "Now you have to go to physicians and talk about safety, efficacy and economics.

"Pharma has got to start seeing the world through the payer's eyes," Longman said.

Of course, that's easier said than done, especially since it's the rise of specialty drugs that is driving most of the growth in drug-related costs in health care. According to Longman, Gilead's Sovaldi, for instance, is expected to have an impact on reimbursement costs in the $20 million to $35 million range.

He advised drug companies to work internally so their R&D and marketing divisions can demonstrate differentiated value with their drugs before reaching out and working to get payers to see and understand that value.

Longman's keynote dovetailed with comments made the day before during a panel featuring Zeke Emanuel, a bioethicist and key architect of the Affordable Care Act, who expressed some strong opinions on how drugs should be priced.

"It's quite clear some things are home runs and quite beneficial," he said. "Other things are very expensive for marginal benefit."

Emanuel offered his four criteria for true innovation – reduced cost for similar efficacy, reduced side effects, improved quality of life or improved safety – with drugs having to meet at least one of those to warrant a significant price tag. The benefits of a drug should match the cost. "A drug that extends patient survival for only a few months, for example, should not be a $125,000 single."

He also took biopharma to task for unnecessary use of drugs. For example, as a breast cancer specialist, he said Avastin (bevacizumab, Roche AG) never should have been covered for use in breast cancer. "There was no evidence of overall survival," he said. Biomarker research turned up nothing new, so "why should we fund that kind of research" when there's no benefit?"

Gleevec (imatinib, Novartis AG), meanwhile, has shown a mean survival benefit of more than seven years. Emanuel said he has no problem with the costs associated with Gleevec because of that large benefit.

Longman also agreed that there should be differentiation in drug pricing. Continuing the baseball analogy, he noted, however, that "most products are going to be singles." The problem with the current business model is that it "demands outsized rewards for singles."

Other speakers throughout the conference agreed that differentiated pricing based on the magnitude of benefit makes sense. But drug development isn't cheap, and cutting returns for investors, they pointed out, will only hurt innovation. "A lot of time that [innovation] comes in incremental bits and pieces," noted Paul Hastings, CEO of Oncomed Pharmaceuticals Inc.

Ken Moch, former CEO of Chimerix Inc. and industry veteran, raised a similar point in a separate panel discussion. Reducing the reward puts increased risk into the system, which, in turn, will reduce the overall pipeline of new drugs. "The barriers to success are getting higher and higher," so the sector needs to figure out a model.

"There has to be some other way to get return for investors," he said.

Reimbursement issues already are coloring the way biopharma execs have to think about development and commercialization. And debate will only increase as the Affordable Care Act likely adds pricing pressure, noted former White House press secretary Ari Fleischer, who debated with Emanuel during the Tuesday panel.

"Biopharma is on deck," he warned attendees, referring to impact from the changes in health care. "You're either at the table or you're on the menu. And a lot of people want biopharma on that menu."