Here’s the recent media history on drug pricing:
- President Trump saying drug companies are “getting away with murder” and he will work to “bring down drug prices.”
- High profile price hikes, secret pharmacy deals and arrested CEOs.
- List prices in other countries of 41% less for the same drugs.
- Revenues generated by premium pricing in the U.S. exceeding, by $40 billion, global R&D expenditures.
During his campaign Candidate Trump communicated a hands-off policy on drug pricing regulations just as he was for deregulation in general. Upon his election biopharma stocks soared 9%. Since the election, President Trump has been less pharma friendly with his negative comments about drug pricing and his willingness to address it. What can he do? Reimportation and Medicare pricing are two of his options.
Allowing the reimporation of drugs from countries with government mandated lower pricing or lower cost retail markets would undermine pricing power in the U.S. and erode pharma sales. Medicare price negotiation would give the healthcare system’s largest payer, the U.S. government, a powerful lever for driving down the costs of drugs for seniors and open those numbers to public scrutiny and ammunition for private payers to negotiate for their members.
The public shaming of all pharmaceutical companies on the massive price increases by a few companies on older medications has generated a call from some firms for pre-emptive self-policing. Allergan CEO, Brent Saunders, has been one of the most vocal advocates of self-policing and pledged to limit price hikes at his own company to under 10%. Novo Nordisk followed suit and Eli Lilly said it would roll-out a 40% discount on its insulin drugs.
Novartis CEO Joe Jimenez advocates a pay for performance model where prices can increase when there is real innovation. Jimenez has said that value based pricing allows drug makers to reap real payoffs for real advances in treatment and discourages high prices on less innovative new medications. Amgen already has some pay for performance arrangements on its cholesterol drug. J&J has a project with Medicare that focuses on rewarding “value of care” versus a blanket price tag.
Will pharma take action to fend off government intervention? Stay tuned.