Snap up a rival, then hike its drugs' prices—is this pharma's new normal?
- The Wall Street Journal's Jonathan Rockoff and Ed Silverman report on an apparent new trend in pharma: buying up a rival company to acquire its pipeline, and then hiking its drugs' prices by a massive amount. One example: On February 10, Valeant bought the rights to CVD meds Nitropress and Isuprel and increased the prices by 525% and 212%, respectively.
- Companies cite various reasons for the seemingly arbitrary price increases, including the increasing costs associated with research and manufacturing.
- Despite the steep increase in the price of many drugs, prescription drug spending only accounts for one-tenth of healthcare costs in the U.S.
Valeant is an extreme example of sudden and steep increases in the prices of newly acquired drugs; however, Valeant is not alone it its actions. According to information from Express Scripts Holding Co. Needham & Co., as reported in the WSJ, since 2008, branded-drug prices have increased by 127%, although the consumer price index has only increased by 11% during the same period.
Another example of a company that has precipitously increased the price of a drug is Horizon Pharma, which bought Vimovo from AstraZeneca in late 2013. By Jan. 1, 2014, Horizon had increased the price of this drug—a combination of naproxen and esomeprazole—by 594% to $959.04 for a bottle of 60 tablets. Then on January 1, 2015, Horizon increased the price again to $1,678.32. The result was an increase in sales between 2013 and 2014, from $20 million to $163 million. This drug is on track to gross $300 million this year—all for a combo of a simple painkiller and PPI.
Payers, hospitals and physicians are starting to push back, and determined to cut costs, including the costs of drugs. How this will play out is not clear. But this pricing trajectory does not seem sustainable to many of the largest and most influential pharmacy benefits managers (not to mention the patients who rely on these medications).