Price increases on top drugs drove majority of recent growth, analysis finds
- Price increases accounted for roughly 60% of recent sales growth recorded in the U.S. for many of the pharmaceutical industry's top-selling drugs, found a new report from analysts at the investment firm Leerink.
- Between 2014 and 2017, U.S. sales for 45 leading products increased by 28%, or about $23 billion. More than $14 billion of those newly won dollars stemmed from price increases during that span, according to Leerink.
- Although the investment bank acknowledged its analysis relies on estimation and incomplete data, the findings highlight just how reliant drugmakers have been on price hikes to drive growth. Without the boost from higher prices, eight of the drugs examined — including Johnson and Johnson's top-selling Remicade and Amgen's Enbrel — would have posted revenue declines.
The main takeaway of Leerink's research — that raising prices has been a core strategy for drugmakers — isn't groundbreaking. Much of the criticism the industry has received in recent years has centered on this conclusion.
What Leerink's number-crunching does make stark, however, is that for a number of aging blockbuster drugs price increases have been the principal driver of revenue growth in recent years.
Increases on the price of Pfizer's nerve pain medication Lyrica (pregabalin), for example, drove 90% of the more than $1 billion in sales growth the pharma recorded for the drug between 2014 and 2017.
For AbbVie's top-selling Humira (adalimumab), price increases accounted for 43% of growth. Roche's trio of blockbuster biologics all saw substantial contributions to growth from price hikes, with Avastin (bevacizumab) drawing 85% of its revenue gains from higher prices.
Drugmakers might be facing a different future, however. While scrutiny on the industry has remained close since 2014, there are signs that government pressure could change the calculus for larger pharmaceutical firms.
A public rebuke of Pfizer from President Donald Trump in July, for instance, led to a rare retreat from the pharma giant, which reversed price increases it had taken earlier that month on several dozen drugs.
Since then, more than half a dozen major pharma companies have pledged to refrain from increasing prices for the remainder of 2018. That's largely an easy promise, since most of those drugmakers had already hiked prices on key drugs in January and they didn't commit to more lasting pricing restraint.
Leerink's Geoffrey Porges, however, believes investors in the makers of drugs analyzed by the bank should anticipate growth rates to "decline significantly" for those products moving forward. In particular, Porges highlighted Amgen's Enbrel (etanercept) and Neulasta (pegfilgrastim), AbbVie's Humira and Pfizer's Lyrica.
Products which have grown through rapidly increasing demand, such as Merck's Keytruda (pembrolizumab), should be more insulated, the analyst wrote.
Growth is already a key question for many large-cap pharmas and biotechs, a number of which also face competition from biosimilar rivals to their top drugs in the coming years. Removing price increases from the equation could reveal just how precarious a position some companies are in.
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