Posted on over 2 years ago by Gerry Kennedy
Pharma has taken a moderated approach to price hikes to start the year, a new analysis concludes. Credit: Getty/Gti337.
It's evidence to justify pharma's current fears. Amid all of the recent scrutiny on drug pricing—and after enjoying years of great pricing freedom in the U.S.—drugmakers have reined in their price hikes since the start of 2017. And that may threaten this year's revenue.
Citing analysts at Raymond James, The Wall Street Journal reports that just 5.5% of prescription drug price hikes so far this year were at 10% or above, compared with 15% last year and 20% in 2015. Last fall, Allergan CEO Brent Saunders proposed a 10% “social contract” threshold for price hikes, and several drugmakers have since said they'll self-police on pricing.
In a blog post on the topic, Saunders reasoned that if pharma doesn’t start making changes, politicians will come up with proposals of their own. Novo Nordisk and Takeda are among the companies to commit to single-digit hikes.
“Limit your price increases before we all face the impact of government regulation that stifles innovation and patient care,” Saunders wrote in a Forbes op-ed.
All told, pharma companies took 2,353 price hikes around the industry last month, a 25% decrease from the year before, according to the Journal. Many drugmakers increase their prices in January, and some follow up later in the year; Saunders' pricing promise limited Allergan's hikes to once a year.
Still, the median price hike for 2017 was similar to last year's at 8.9%. And price increases that size, compounded annually, can quickly add up.
Valeant, often a target in the pricing debate, actually reduced the price of its troubled heart med Nitropress by 66%, according to a Wells Fargo report. The company previously bought the drug and jacked its price up by more than 500%, leading to Congressional scrutiny. The new price is still 40% higher than it was when the drugmaker acquired the med, Wells Fargo notes.
As the WSJ reports, companies could be dialing back on price hikes to avoid provoking a political push for Medicare price negotiations.
Despite the industry’s recent moderation on price hikes, single-digit increases on big sellers such as rheumatoid arthritis meds from AbbVie and Amgen can still mean huge boosts in spending.
Both of those manufacturers increased prices for their respective anti-inflammatory blockbusters by 8.4% last month, and Raymond James analyst Elliot Wilbur predicts the hike on AbbVie’s Humira alone could boost U.S. healthcare spending by $850 million this year, according to the Journal.
That’s not to count out Amgen’s move on Enbrel, taken days after AbbVie’s Humira price hike. Amgen execs said payer discounts will eat up most if not all of its latest round of hikes, but Bernstein analyst Ronny Gal wondered whether the company would see 1% or 2% of net value at that “magnitude” of a price increase.
It hasn’t helped the industry’s reputation that even as scrutiny has swelled over the last year and a half, repeated instances of controversial pricing continue to surface. Kaléo recently announced a competitor to Mylan’s EpiPen at a price multiples higher, and Marathon Pharma put an $89,000 sticker on an old drug just approved for Duchenne muscular dystrophy. A quick uproar caused the latter company to “pause” its launch.
Depending which pharma exec you ask, though, you may get a different view about how the industry approaches pricing. Speaking at a conference in December, Regeneron CEO Leonard Schleifer said pharma has “used price increases to cover up the gaps in innovation.”
Meanwhile, Pfizer CEO Ian Read contended that business models vary for different players. He said “the total cost of drugs as a percentage of healthcare has not changed in two decades.”
In response to then-President-elect Donald Trump’s statement that the industry was “getting away with murder,” Read said the much of the “problem of reputation is coming from those that I don’t consider part of the ethical pharmaceutical business.” Companies like Pfizer, he said, conduct research and price responsibly.
Write something here...