- French drugmaker Sanofi handed insurers and pharmacy benefit managers rebates totaling more than half of its gross sales in the U.S. last year, resulting in net price declines across its portfolio despite list price hikes taken on dozens of its prescription products.
- In 2018, Sanofi reported an average list price increase across its drugs portfolio in the U.S. of 4.6% — just below the projected growth rate for U.S. national health spending last year, a threshold set by Sanofi as the upper bound for its price increases. The figures come from an annual report released by the company Thursday.
- On a net basis, however, average prices declined by 8%, as the pharmaceutical company gave out $4.5 billion in mandated rebates to government payers and $7.3 billion in discretionary rebates. Widening gross-to-net spreads have become a flash point in the industry, with drugmakers pitted against insurers in a fierce debate over the role rebates play in pharmaceutical pricing.
Sanofi's released its report days ahead of a highly anticipated Senate hearing that looks likely to intensify scrutiny of the industry's pricing practices. Company CEO Olivier Brandicourt is set to testify alongside six of his pharma executive peers, setting the stage for a high-profile confrontation between lawmakers and leaders of some of the largest drugmakers.
Brandicourt, along with his colleagues, are likely to marshal arguments similar to what Sanofi laid out in its report: namely, that list prices are increasingly divorced from net prices due to sizable rebates given to payers in exchange for coverage.
Data recently released by Iqvia show U.S. invoice prices, which correlate with list prices, rose by 5.7% for patent-protected branded products in 2018, while net prices rose by only 1.5%.
From another perspective, however, Sanofi's "limited U.S. price increases" look less restrained. The drugmaker upped list prices on 35 of its 76 medicines — six more than the year prior — and the 4.6% average list price increase in the U.S. was higher than what was reported for both 2016 and 2017.
Sanofi pricing in the U.S
|Average aggregate list price||Average aggregate net price|
At next week's hearing, Sanofi could be in the hot seat over increases on one drug in particular, its flagship insulin Lantus (glargine).
Insulin pricing has been a particular focus for lawmakers angered by steadily rising prices for a drug needed by many diabetics to survive.
In 2018, for example, Sanofi increased the list price of Lantus by 5.3%, the highest amount possible under the drugmaker's pledge to go no higher than the forecast growth rate for U.S. National Health Expenditures. According to the report, the company raised Lantus' price only one other time over the past four years, by 3% in 2017.
That claim is already outdated, as the company took a 5.2% increase on Lantus last month, according to research firm 46brooklyn.
To Sanofi's point, though, diabetes drugs like Lantus are frequently subject to considerable rebating in the U.S. The drugmaker claims the average net price across its insulin portfolio is 25% less than it was in 2012 even as list prices have more than doubled during that same time span.
Typically, drugmakers pay rebates to pharmacy benefit managers or insurers, which then use the savings to lower premium costs for insured members. Patients can still face the full list price for a drug, however, such as when they are paying down a deductible or have co-insurance on medicine costs.
In those cases, drugmaker arguments that list prices don't reflect the true cost of a product fall flat — something that Sanofi has seemed to acknowledge.
"We understand, of course, the anger in the U.S. about rising prescription drug costs for patients and the confusion about why the value created from declining net price has frankly not provided direct relief to patients," said Sanofi CEO Olivier Brandicourt on a recent earnings call.
The executive noted Sanofi's support for a recent proposal by the Trump administration to do away with certain drug rebates in Medicare, a move aimed at lowering patient out-of-pocket costs for medicine.