Blog August 20, 2018

Drug Pricing and Pharma

PillsIn September 2015, Martin Shkreli, then CEO of Turing Pharmaceuticals, sparked widespread outrage in the United States when the company raised prices on an off-patent treatment for toxoplasmosis, Daraprim, by over 5,000%, just one month after Turing acquired the drug. That action catapulted the medicine’s price from $13.50 to $750 per pill. But journalists found that Turing was far from alone in excessively hiking drug prices. The cost of more than 20 brand name drugs had apparently doubled or more between 2014 and 2016, with some drugs climbing in price by as much as 3,000% over the two-year period.


Further adding to the public reaction, consumers have also become increasingly aware of the increased costs of prescription drugs, as many people have elected higher deductible insurance plans requiring a higher co-pay for their medicines. Some of the business practices of pharmacy benefit managers have contributed to the drug pricing issues faced by consumers. A lot of discussion amongst policy makers and the media has centered (rightly or wrongly) on pharma’s role in the high cost of prescription drugs, making drug pricing a focus of much attention.


In July, a Presidential tweet slammed pharmaceutical manufacturers, saying that Pfizer and others that had recently enacted modest price increases on certain drugs should be ashamed “that they have raised drug prices for no reason!” The administration had, two months prior, announced plans to develop a Blueprint to Lower Drug Prices — which surveys found only about a quarter of Americans had heard about, and few believed would do anything to help their pocketbooks.


But Pfizer, Novartis, Merck and others responded to the President’s tweet with actions to reduce prices on some drugs, at least temporarily. For example, Pfizer agreed to roll back recently announced price increases and to keep prices at the pre-increase level until the Blueprint for lowering costs goes into effect or by the end of the year, whichever comes sooner. Novartis, which in January had already raised prices on some drugs by 9% or more while also beginning to reduce some of these price hikes in California in response to a new state price transparency law, agreed not to raise prices for the rest of the year. Merck agreed not to increase prices more than the annual inflation rate and also made sizable cuts in the wholesale prices on some older or lesser-selling drugs.


Will the Trump Administration pressures persuade pharmaceutical manufacturers to take action and reduce the cost of their drugs, beyond a few months of static or reduced prices — something no other administration has accomplished?  What would be the impact on the pharmaceutical industry if they did? (Hint — one of the Bionest team shared some of his thoughts related to this subject here, earlier this year.)