Drug Development

Allergan CEO Brent Saunders takes a pricing pledge: Predatory practices must end

Brent Saunders, Allergan

Brent Saunders, Allergan

Caught in the latest tempest over dramatic price hikes for old therapeutics, Allergan CEO Brent Saunders is swearing off the practice, vowing to maintain a fair pricing policy that could well inspire others in the business to follow suit.

This pledge includes limiting Allergan’s annual price hikes to modest single-digit increases, and Saunders says Allergan will never again jack up prices without a significant increase in costs as products near the loss of patent protection, diverging from a standard industry practice he admits the company has followed in the past.

In a blog post today, Saunders says:

Where we increase price on our branded therapeutic medicines, we will take price increases no more than once per year and, when we do, they will be limited to single-digit percentage increases. Our expectation is that the overall cost of our drugs, net of rebates and discounts, will not increase by more than low-to-mid single digits percentages per year, slightly above the current annual rate of inflation.

There’s more. Saunders says that if the industry is expected to continue to invest huge amounts in R&D, there has to be a way to properly reward innovation. Drug research, he adds, is done in a fragile ecosystem that will quickly collapse without appropriate prices for new therapies.

“This ecosystem can quickly fall apart if it is not continually nourished with the confidence that there will be a longer term opportunity for appropriate return on investment in the long R&D journey,” writes Saunders.

The industry has been quick to maintain the same position on R&D, noting that biopharma traditionally invests a relatively large percentage of its revenue in research. But Saunders commitment to a specific pricing policy may take more than a few industry execs by surprise. Regular, double-digit price hikes have become a mainstay in the industry, followed by all the big players.

That practice, though, has come under fire as Mylan, Valeant and Turing have all come under fire in the last year for big price hikes on older products that no one is investing in. And the storm of protest has spurred Hillary Clinton to offer a new plan to rein in drug prices, making this a potent political issue in the run up to the fall election.

The industry lobbying group BIO, meanwhile, has decided to counter the current shockwave by launching an advertising campaign aimed at highlighting the good drug developers do. These kinds of feel-good campaigns about the positive aspects of new drugs, though, aren’t likely to even make a dent in the public rage focused on price gouging. I asked BIO’s Jim Greenwood for a comment on Saunder’s plan, but he declined to respond.

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