Drugmakers open new year with price increases on dozens of medicines
- Several major drugmakers, including Allergan, Bristol-Myers Squibb and Eli Lilly, increased prices on a number of their drugs Jan. 1, holding with typical industry practice despite continuing scrutiny of rising pharmaceutical costs.
- Relative to its pharma peers, Allergan moved most aggressively, upping the list price of Linzess, Lo Loestrin and 25 other medicines by 9.5% — just below the 10% threshold many manufacturers have set as a self-imposed upper bound for annual increases. Biogen increased the price of its flagship multiple sclerosis drug Tecfidera by 6%, while Bristol-Myers raised prices for Eliquis, Orencia and Sprycel by a similar 6%.
- While raising prices in January has become the norm for pharma, this year has become a test of whether recent criticism by lawmakers and the Trump administration would spur companies to hold off on increases. Data cited by Raymond James suggests this could be playing out somewhat: Drugmakers overall have instituted fewer price hikes from Dec. 1 through Jan. 1 than the same period last year, according to a recent note from the investment bank.
A handful of major drugmakers paused or rolled back planned price hikes in the middle of 2018 after President Donald Trump publicly clashed with Pfizer. But so far such criticism hasn't appeared to stay a return to "business as normal," as Pfizer's CEO Ian Read recently predicted.
Pfizer announced in November that it would increase prices on 41 drugs, or about 10% of its overall portfolio beginning Jan. 15, with most prices rising by 5%. Soon after, Merck & Co. confirmed it raised the wholesale acquisition cost of five drugs, including its top-selling cancer immunotherapy Keytruda (pembrolizumab) and vaccine Gardasil (HPV 9-valent vaccine, recombinant).
Now, with the start of 2019, Allergan, Biogen, Bristol-Myers and Eli Lilly have followed suit.
Select recent drug price increases
|Drug||Maker||List price increase||2019 forecast sales (millions)|
*Merck increased prices in November SOURCE: Companies, analyst reports, forecasts from Evercore ISI
Allergan said it increased U.S. list prices on 51 medicines — 27 of which by 9.5% and 24 by 4.9%.
"Allergan does not expect to realize any (0%) net benefit from price increases as higher rebates and discounts paid to PBMs, insurers and government programs fully offset expected list price increases," a spokesperson for Allergan said in an emailed statement.
The pharma company said its average price increase across all drugs in its portfolio is approximately 3.8%.
Allergan's claim on net prices is a common one, as many drugmakers emphasize that net prices have grown slowly or fallen, even as they increase list prices.
"We will be working closely with [pharmacy benefit managers] and payers to help minimize the impact of out-of-pocket costs to patients," wrote a Biogen spokesperson in an emailed statement. "Across Biogen's [multiple sclerosis] portfolio, the year-over-year net price increase is under 2%, below the rate of inflation."
According to the latest available data from the U.S. Department of Labor, the percent change in the consumer price index was 2.2% over the 12 months from November 2017 to November 2018. National health expenditures in the U.S., a measure compiled by the Department of Health and Human Services and used by at least one major drugmaker as a benchmark, rose by 4.6% in 2017 and are expected to grow by 5.3% this year.
Pharma's persistence in increasing prices despite substantial criticism underscores the degree to which large drugmakers have come to rely on price hikes for growth.
A recent analysis from Leerink, for example, found price increases accounted for about 60% of sales growth in the U.S. for 45 of the industry's top drugs between 2014 and 2017.
Some drugmakers do seem to be more attuned to public scrutiny, however, instituting fewer price increases overall or choosing to apply increases to select, important products.
Data tracked by Raymond James show drugmakers instituted price increases on 108 different branded medicines between Dec. 1, 2018 and Jan. 1, compared to 197 products during the same period last year.
Across that group, median increases checked in at 6%, below the 8.1% in the prior year.
"We suspect many of these firms are simply taking more of a wait-and-see approach, with a greater number of increases anticipated in the weeks ahead," Raymond James analyst Elliot Wilbur wrote in a Jan. 1 note to investors.
Celgene, Amgen and Gilead Sciences have yet to take any increases on their principal medicines as of Jan. 1, according to data from Evercore ISI's Umer Raffat.
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