Pfizer’s recent round of drug price hikes in the wake of President Donald Trump’s promise of cascading costs has drawn the attention of the commander-in-chief.
Pfizer & others should be ashamed that they have raised drug prices for no reason. They are merely taking advantage of the poor & others unable to defend themselves, while at the same time giving bargain basement prices to other countries in Europe & elsewhere. We will respond!
— Donald J. Trump (@realDonaldTrump) July 9, 2018
The Financial Times first reported that Pfizer had hiked prices on 100 products at right around 9% for most, fitting under a 10% cap that most manufacturers are happy to comply with. Just a few weeks ago, though, Trump caught the attention of the industry when he promised that pharma companies were about to deliver “voluntary massive drops in prices.”
Turns out, the industry hadn’t been alerted, and HHS Secretary Alex Azar was left with the task to explain that deep price cuts weren’t really in the cards. Teva and Roche also raised prices recently, according to a report from Reuters.
Pfizer CEO Ian Read is probably the last chief in Big Pharma to succumb to pressure from the government on pricing. Nearing the end of his reign, he’s been outspoken about boosting prices as needed for his business and required a change in tax policy from the Obama administration to stop a planned M&A deal to shift his tax base to a more appealing environment — like what the UK has to offer.
Interestingly, Bernstein’s Ronny Gal put out a note earlier today that says Azar has been looking for some cover on pricing — without tampering with the bottom line.
We learned from industry contacts that Trump’s promise for major price cuts has blindsided HHS. In response, HHS invited multiple industry companies to meetings over the past two weeks asking them to reduce list prices materially, clarifying the agency does not expect reduction in net prices or in patient out of pocket costs. BERN: this data point raises our confidence this administration will not introduce policies that will materially negatively impact the drug industry. It suggests that the current focus is on politically-visible ‘points’ rather than addressing drug costs (we struggled for a bit with finding ways to say this politely 🙂 ). We expect the drug industry to look for ways to accommodate the administration (perhaps with PBM help – they are also looking for ways out of the cross-fire).
These annual price hikes have become standard operating procedure in Big Pharma, particularly at Pfizer. But in response to the president’s Tweet, Pfizer had this to say in its defense:
The list price remains unchanged for the majority of our medicines. Our portfolio includes more than 400 medicines and vaccines; we are modifying prices for approximately 10% of these, including some instances where we’re decreasing the price. Importantly, list prices do not reflect what most patients or insurance companies pay. In the first quarter of 2018 the net selling price increase was 0% due to the growing amount of rebates paid back to stakeholders in the biopharmaceutical supply chain.
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