Policy, Pricing

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.


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