Pfizer price hikes on pause after Trump pressure
- Pharma giant Pfizer said it will at least temporarily roll back price increases it took at the start of July on about 40 drugs, beating a retreat after company CEO Ian Read spoke with President Donald Trump, who had earlier attacked Pfizer's price hikes on Twitter.
- Prices on those products, which reportedly included major brands like Viagra and Chantix, will revert back to pre-July 1 levels as soon as "technically possible," Pfizer said in a statement. The reprieve, though, may only be temporary — the pharma suggested prices could increase again next year.
- Pfizer's decision is a public relations win for the Trump administration and marks a rare about-face from a company seen as a standard bearer for the drug industry. Yet, the reversal will not reduce prices below the pre-July status quo and is a far cry from the "massive' cuts from drugmakers that Trump in May promised would be coming soon.
Until now, Trump's bluster on drug prices has yielded few tangible concessions from the pharma industry.
Investors learned to largely ignore the periodic tweets from the president criticizing drugmakers. (Trump's initial comments on Pfizer, for example, barely budged the company's share price). The administration's long-awaited plan to reduce drug prices received a decidedly tepid reaction and raised more questions than it delivered answers. And a wave of price increases taken by a handful of drug companies over the past few months seemed to suggest executives saw little risk to business as usual.
Pfizer's retreat certainly breaks with that trend, although it remains unclear whether it's a preview of more substantive changes to come or is merely designed to ease political pressure.
Health and Human Services Secretary Alex Azar called it "a step in the right direction and a major win for American patients," echoing comments by the president on Twitter.
Just talked with Pfizer CEO and @SecAzar on our drug pricing blueprint. Pfizer is rolling back price hikes, so American patients don’t pay more. We applaud Pfizer for this decision and hope other companies do the same. Great news for the American people!— Donald J. Trump (@realDonaldTrump) July 10, 2018
Pfizer's statement, however, suggests its decision may be more a temporary delay than any new limit on how it approaches drug pricing.
"The company will return these prices to their pre-July 1 levels as soon as technically possible, and the prices will remain in effect until the earlier of when the president's blueprint goes into effect or the end of the year — whichever is sooner," Pfizer said.
This implies that, come January 1, Pfizer could again move forward with the industry's traditional price increase at the start of the year unless the blueprint is implemented before then. That appears a difficult task, given the broad scope of the document and looming mid-term elections that will consume much of the legislative bandwidth for the remainder of the year.
In a July 11 note to clients, Height Securities analyst Andrea Harris emphasized the chances of Congress passing some of the major legislative changes proposed by the blueprint to be virtually nil. Harris noted, however, that Pfizer's comments could refer to more limited actions the administration could take around rebates.
"Pfizer's statement about deferring price increases until the President has a chance to implement the Blueprint places additional pressure on the Administration to propose policy changes that will change the use of rebates," Harris wrote.
Action on rebates could end up impacting pharmacy benefit mangers, often pharma's opposition, more than drugmakers.
One remaining question is whether the Trump administration effectively threatened Pfizer to withdraw its price hikes, or if Pfizer agreed to do so after hearing more details on the administration's plans.
A number of other drugmakers, including Celgene, Bayer and Sanofi, have also hiked the prices of their products recently. After the success with Pfizer, Trump could be tempted to publicly pressure others as well. Shares in most major drugmakers fell in mid-morning trading Wednesday, perhaps reflecting this potential concern.
Elsewhere, others such as Gilead and Novo Nordisk have reportedly held off on hikes prices in reaction to a recently passed California law requiring notice of large increases, Bloomberg reported July 10.
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