By Jonathan D. Rockoff and Peter Loftus
Facing mounting criticism about prices, drug companies put some
limits on their increases this year.
Prescription-drug makers traditionally raise list prices in
January. This year, they didn't raise prices for as many drugs as
last year and imposed fewer boosts of 10% or greater, according to
an analysis by the investment firm Raymond James &
Associates.
About 5.5% of the increases reached the 10% level. A year ago,
15% did, and two years ago, 20% did.
Even so, the median drug-price increase was little changed from
last year, at 8.9%, still far above the U.S. inflation rate of
around 2%.
Self-policing on prices hasn't been universal. Marathon
Pharmaceuticals LLC caused an outcry two weeks ago when it set an
$89,000-a-year starting price for a decades-old muscular-dystrophy
treatment that Americans could get from abroad for $1,600 a year or
less until Marathon won U.S. approval to sell it. After criticism
in Congress and elsewhere, Marathon said it would delay the
launch.
And six months after the EpiPen uproar -- Mylan NV was charging
$609 for a two-pack of the allergic-reaction treatment -- a company
called Kaleo said it would charge $4,500 for a competing product,
Auvi-Q.
Kaleo said it has a way to cut the cost to zero for most
patients, though not for health plans. On the EpiPen, Mylan later
offered a $300 generic version.
Even price increases below 10%, as most of this year's are, can
drive total drug spending up by hundreds of millions of dollars.
Take Humira, an arthritis and psoriasis treatment that brought in
$10.4 billion for AbbVie Inc. in U.S. sales last year. AbbVie
raised Humira's list price 8.4% in January, which could mean as
much as $850 million in additional U.S. health-care spending this
year if usage holds steady, according to Raymond James analyst
Elliot Wilbur.
The January increase came on top of 18.5% in price boosts AbbVie
took last year for Humira, which it advertises heavily to U.S.
consumers on TV.
AbbVie said the figures don't take into account discounts and
rebates from the list price provided to middlemen such as
pharmacy-benefit managers. The discounts mean that manufacturers
must share the increased revenue with others, but they can still
leave buyers such as insurers paying the higher price, or most of
it. And regardless of discounts to middlemen, patients who have
high-deductible health plans may have to pay close to full price
for at least part of the year.
Allergan PLC Chief Executive Brent Saunders said his company
will collect only 2 or 3 percentage points -- in line with
inflation -- of the average 7.4% by which Allergan raised list
prices of its prescription drugs in January.
One Allergan increase was 9% on its Estrace vaginal cream --
narrower than last year's 9.9% increase and far below the 38% by
which Allergan raised the drug's list price about two years
ago.
Part of the reason pharmaceutical makers are keeping most price
boosts below 10% is concern that bigger ones could spark public
anger, industry analysts say. Drug companies are "sticking with
what they perceive to be the rate the market will bear, high single
digits," said Mr. Wilbur.
Companies also hope to blunt calls for granting Medicare
authority to negotiate drug prices directly with companies, which
it now is legally barred from doing, according to industry
analysts.
President Donald Trump has broached the idea of giving Medicare
such power. He told pharmaceutical executives at a White House
meeting last month that drug "pricing has been astronomical for our
country" and vowed to take steps to "get the prices way down."
He didn't mention Medicare negotiating power, but White House
press secretary Sean Spicer said early this month Mr. Trump still
favors it. The possibility of such authority for Medicare, the
biggest U.S. prescription-drug buyer, has been a weight on drug
stocks.
In all, producers raised the U.S. list prices of 2,353
prescription drugs in January. That was about a quarter fewer than
in January 2016, according to Raymond James, which based its
analysis on prices known as the "wholesale-acquisition cost."
In the drug industry, "price increases have become a substitute
for innovation," said the CEO of Regeneron Pharmaceuticals Inc.,
Leonard Schleifer, in an interview. "If we continue to go crazy
with price increases, the government will have to step in."
Regeneron hasn't raised prices on its three drugs since their
launch.
At Valeant Pharmaceuticals International, a habit of steeply
raising prices, including a 525% increase on a newly acquired drug
in 2015, led to a grilling by U.S. senators in April. Last month,
Valeant raised the price of more than 50 products by an average of
8.4%.
It cut the price of one, the heart drug Nitropress, by 66%,
according to Wells Fargo Securities, about two years after having
tripled it.
Valeant's CEO at the time of the Senate hearing admitted the
company had been too aggressive in pricing. This month, a
spokeswoman for Valeant said the company has decided its annual
price increases will be under 10% and below the five-year weighted
average of increases in the industry.
A few drug companies have promised more price information.
Johnson & Johnson recently said it would report the average
list-price increases for all of its drugs and their average cost,
after discounts, to payers such as Medicare and insurers. AbbVie
and Allergan have pledged to raise list prices only once a year and
by no more than 9.9%.
Some companies, though, have raised prices for certain products
more aggressively than in past years. Astellas Pharma Inc. upped
the list price of organ-transplant drug Prograf by 9% last month, 2
percentage points more than its annualized rate of increases from
mid-2014 to mid-2016, according to Raymond James. Astellas said it
prices medicines based on the value they provide and uses the
revenue to fund drug development.
The industry has moved to restrain price increases before. Early
in the Clinton administration, worried about a risk of price
controls, the main pharmaceutical-industry trade group pledged to
limit increases to the consumer inflation rate.
Such self-policing "has never been long-lasting," Goldman Sachs
wrote in a note to clients this past September, adding: "Price
increases have become an industrywide practice, especially since
2010, when reliance on higher price increases" for revenue growth
intensified.
Write to Jonathan D. Rockoff at Jonathan.Rockoff@wsj.com and
Peter Loftus at peter.loftus@wsj.com
(END) Dow Jones Newswires
February 26, 2017 20:26 ET (01:26 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.