BIOREGNUM — the view from John Carroll
With the price of drugs front and center in Washington DC these days, Regeneron and Sanofi are attracting kudos for their decision to hold back the price hike on Dupixent to a mere 3%, which the pharma giant notes is well within the rate of medical inflation — their cap on price increases.
Both of these companies went through the ringer on PCSK9 pricing — which have come down — and Regeneron CEO Len Schleifer has been a consistent counsel for avoiding the big annual price increases that is attracting so much criticism these days.
$REGN CEO Len Schleifer has often decried the industry’s “egregious” price increases, and Piper Jaffray points out the co never increased price of Eylea in its 7 yrs on the mkt. REGN’s statement on Dupixent 3% bump: pic.twitter.com/07Dbq415OP
— Meg Tirrell (@megtirrell) July 2, 2018
Still, note that the overall price trend is still pointed up, not down, which is what President Donald Trump promised recently with his comment that the big chains were about to trigger “voluntary massive drops in prices.” That comment a month ago was a stumper for the pharma industry, which has promised no such thing. It’s also left it to HHS Secretary Alex Azar to explain that that is not exactly the case.
Yesterday’s news that Pfizer was increasing prices across a broad range of drugs has focused attention once again on a standard industry practice: looking to please investors with a growing bottom line that relies heavily on jacking up the cost of its portfolio therapies. In Pfizer’s case, the Financial Times reported that the average price increases for 100 products were around 9%, fitting under a 10% cap that most manufacturers are happy to comply with.
That’s not making consumer advocates very happy, as we saw yesterday with a suggestion from the Pew Charitable Trusts that states could tax the revenue that pharma companies bring in through tax hikes. So when AbbVie raises its price on Humira, an aging standard of care that ranks as the biggest money maker in the industry, a state like California could levy a tax on the gain above the inflation rate.
Last year, remarks Pew, average list prices for drugs jumped 6.4% and overall inflation was limited to a tiny fraction of that. They’re suggesting that states can claw back the cost of an increase by taxing anything over an inflation-adjusted price — just the way payers can require a rebate on the inflated cost.
For example, if a manufacturer increases the price of a drug from $100 to $115, but inflation is only 2 percent, the inflation-adjusted price is $102 and the manufacturer must pay Medicaid a $13 inflation rebate. A state tax on drug price increases could be designed to mirror the calculations that determine the Medicaid inflation rebate, reducing the compliance burden on drug manufacturers.
The law currently allows manufacturers to price drugs at will, giving the feds no control at all. States, says Pew, don’t have to stand idly by.
Look for the industry to bat back anything like that as fast as they can. The lobbying groups representing the industry far prefer a self-policing mechanism while the Trump administration has taken a name-and-shame approach to the most egregious price hikes — such as Celgene’s 20% hike on Revlimid within one year.
Regeneron and Sanofi — which have scored a slate of new approvals to push revenue growth — may yet win out with their approach, but many of the biggest players clearly don’t want to be bound by any such restrictions. Not everybody has Regeneron’s development skills, and somebody has to pay to make up for the innovation gap. And with prices still climbing north, the debate over drug prices just continues to heat up.
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