- Pfizer CEO Ian Read said Tuesday the pharma plans to return to “business as normal” when making decisions on pricing its products for next year, implying an earlier pledge to defer price hikes for the remainder of 2018 would not continue come January.
- Following President Donald Trump’s public rebuke of Pfizer in July, more than a half a dozen major drugmakers — including Novartis, Roche and Gilead Sciences — announced plans to refrain from increasing prices for the second half of the year.
- Criticized by some as token pledges, the announcements mostly carried an expiration date, raising the question of how the industry would move forward in 2019. Read’s comments, along with recent remarks by Johnson & Johnson executives, suggest a return to pricing practices more in line with past patterns.
Pfizer’s reason for reversing its July price hikes, ostensibly at least, was to allow time for the Trump administration to more fully roll out policy plans contained in a “Blueprint” released last May.
Since then, the Department of Health and Human Services has rolled out two major proposals, aimed at putting pressure on drugmaker price increases and potentially piloting a new way of paying for drugs in Medicare Part B.
While significant, both proposals are far from implementation. And it appears that for Pfizer the plans announced to date haven’t spurred a fundamental rethink in how the pharma approaches drug pricing.
“We did voluntarily agree to defer price increases until the Blueprint was implemented over the end of this year,” Pfizer’s Read said on a third quarter earnings call Tuesday. “I expect our approach by the end of the year will be what I would characterize as business as normal.”
“We price to the marketplace,” he continued. “We price competitively and we will make those decisions towards the end of the year and early in January.”
There’s a reason that Pfizer, and potentially other pharmas, would be eager to return to their normal practice or annual or bi-annual price hikes, of course.
An analysis by Leerink, an investment firm, found that price increases accounted for 60% of recent sales growth recorded in the U.S. for many of the pharmaceutical industry’s top-selling drugs.
Increases in the price of Pfizer’s Lyrica (pregabalin) drove 90% of its growth between 2014 and 2017, for example. Generic competition to Lyrica could enter the market next year, which may have played a role in this more aggressive pricing strategy.
Besides the jabs from Trump, the looming mid-term elections, too, may have played a role in drugmakers’ decision-making after years of rising criticism on drug prices. Polls show healthcare high on voters’ minds.
J&J, another major U.S. pharma, also doesn’t anticipate a major shift in pharmaceutical pricing next year.
“I think we’re going to see a continued evolution in some of the categories where there are a very high level of competitors,” said Jennifer Taubert, global head of J&J’s pharmaceuticals unit, said on a third quarter earnings call. “But it will be an evolution in pricing, not a revolution or a step change.”
The Trump administration has been quick to call out cases of pharma companies reducing prices, such as Merck’s decision to drop the price of a hepatitis C drug or Gilead’s launch of a generic version of two of its top-sellers. But the question remains whether those examples are isolated cases of unusual market pressures, or signs of a broader re-evaluation.