As Trump fin­gers phar­ma on drug prices, ex­ecs step up with the lat­est vows of self dis­ci­pline

Ab­b­Vie’s Richard Gon­za­lez

Just as Don­ald Trump was rip­ping the lid off a can of whup-ass and pour­ing it all over the bio­phar­ma in­dus­try, Ab­b­Vie’s chief was step­ping up to fol­low Al­ler­gan CEO Brent Saun­ders’ lead on cap­ping an­nu­al drug price in­creas­es.

In a talk at the J.P. Mor­gan con­fer­ence, Ab­b­Vie CEO Richard Gon­za­lez pledged to keep the com­pa­ny’s an­nu­al price hikes on its drug port­fo­lio to sin­gle dig­its, in line with Saun­ders promise to keep Al­ler­gan’s in­creas­es to sin­gle dig­its. And No­vo Nordisk has al­ready fol­lowed up with its com­mit­ment to do the same, mark­ing a ma­jor shift in the way the in­dus­try han­dles drug prices af­ter years of swift spikes.

“There’s a strong de­bate go­ing on right now about pric­ing,” Gon­za­lez told in­vestors, ac­cord­ing to a re­port in Reuters. “We need to make sure we are op­er­at­ing in an ap­pro­pri­ate way … and demon­strat­ing the val­ue of the prod­ucts that we have.”

What Gon­za­lez ev­i­dent­ly wasn’t aware of was that Trump veered in­to the drug pric­ing is­sue dur­ing his press con­fer­ence on Wednes­day, vow­ing to ham­mer drug prices down through a fed­er­al bid­ding process af­ter the in­dus­try had been  “get­ting away with mur­der.”

Joaquin Du­a­to (Pho­to: End­points News)

Drug prices, and what the in­dus­try is go­ing to do about the grow­ing pres­sure to con­trol costs, was at the cen­ter of a dis­cus­sion End­points News host­ed Tues­day morn­ing at J.P. Mor­gan in San Fran­cis­co. We start­ed with J&J’s Joaquin Du­a­to, who promised to re­veal an­nu­al price in­creas­es to help demon­strate the com­pa­ny’s dis­ci­pline.

But the glob­al phar­ma gi­ant is not go­ing to break down the price hikes on a drug-by-drug ba­sis, he added in re­sponse to a ques­tion, so they can main­tain a com­pet­i­tive edge.

“It’s go­ing to be done on an ag­gre­gate lev­el,” Du­a­to told the crowd. Spe­cif­ic prices are “some­thing that we do not want to dis­close be­cause of the com­pet­i­tive im­pli­ca­tions. The same way that we are talk­ing about dis­counts and re­bates, we are go­ing to dis­close them at an ag­gre­gate lev­el, be­cause dis­clos­ing dis­counts and re­bates by chan­nel does have a com­pet­i­tive im­pli­ca­tion too.”

Richard Pops, Brent Saun­ders (Pho­to: End­points News)

Whether or not that will be enough to dis­pel a grow­ing na­tion­al con­tro­ver­sy won’t be known for some time. But Trump’s re­marks un­der­scored that it’s a new day in bio­phar­ma when it comes to drug prices. And Richard Pops, the CEO of Alk­er­mes, not­ed that change is com­ing af­ter Big Phar­ma got hooked on the crack co­caine of ex­ten­sive price hikes for years.

For me it’s so in­ter­est­ing be­cause un­bur­dened with any ex­pe­ri­ence of hav­ing run a phar­ma­ceu­ti­cal com­pa­ny I come to it al­most like a Mar­t­ian from Mars com­ing to say, “How does this whole thing work?” It’s so bizarre be­cause, I must ad­mit, I don’t think any of us re­al­ized how fre­quent­ly phar­ma­ceu­ti­cal com­pa­nies were in­deed rais­ing prices over the last decade or so. How ex­ten­sive the price in­creas­es were, and in the set­ting of an in­vestor con­fer­ence, you re­al­ize just what crack co­caine that is when you cou­ple unit growth of a launch­ing med­i­cine with se­mi-an­nu­al price in­creas­es. You just get ex­plo­sive earn­ings growth, which is ex­act­ly what the mar­ket wants.

For Saun­ders, the in­dus­try is head­ed in the right di­rec­tion, but peo­ple should pay more at­ten­tion to net rather than gross price hikes.

Ten days in­to the year, you’re right, a lot of com­pa­nies are fig­ur­ing out that they need to be more thought­ful and cau­tious about price in­creas­es, which is a good thing….The re­al num­ber is the net. I mean, we could talk about the gross all day, and we’re hap­py to de­bate that, but the net…is prob­a­bly some­where be­tween one and 4%, de­pend­ing on what their re­bate and dis­count lev­els are. You know, I think com­pa­nies are act­ing more re­spon­si­bly than ever, and I think that’s a good thing.

We’ll have the full pan­el dis­cus­sion for you next week here at End­points.

John Hood [file photo]

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On June 18, 2019, we initiated a confidential arbitration proceeding against Dr. Asa Abeliovich, our former consulting co-founder, related to alleged breaches of his consulting agreement and the improper use of our confidential information that he learned during the course of rendering services to us as our consulting Chief Scientific Officer/Chief Innovation Officer. We are in the early stage of this arbitration proceeding and are unable to assess or provide any assurances regarding its possible outcome.

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CEO Pascal Soriot via Getty Images

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