Sanofi vows to limit price hikes—but it won't make much difference

The drugmaker Sanofi pledged to limit its drug price hikes in the U.S. to the healthcare inflation rate and be more transparent with price increases.

Sanofi is one of many pharmaceutical companies that have vowed to curtail its drug price hikes that have squeezed the bottom lines of providers, payers and consumers alike.

It is a firmer policy than other companies have made, and Sanofi hopes others will follow suit. While Sanofi's promise to link increases to the rise in the National Health Expenditure Data Accounts as tracked by the CMS—estimated to be 5.6% annually from 2016 to 2025—is a step in the right direction, it is not enough, healthcare experts said. Price hikes will still add up quickly, they said.

A better benchmark would be capping price increases at the Consumer Price Index, which has averaged around 1.4% since the Great Recession, experts said.

"Drug price increases still far outpace medical inflation," said Dr. Scott Knoer, chief pharmacy officer of Cleveland Clinic. "The current model is unsustainable. We just can't have (drug price) inflation in double digits like we have had and provide healthcare medications to patients. It's a budget-buster."

Drug companies have been pressured to change their pricing policies after high-profile disputes like the one involving EpiPen. The emergency allergy drug's price grew 500% from 2007 to 2016.

Big Pharma lobbyists claim that medical treatment is expensive and high prices are needed to fund research and development. Yet, research shows that profits often significantly outpace R&D costs. Pharmaceutical companies contest that other players in the supply chain, like pharmacy benefit managers, absorb much of the price increases.

Dr. Roy Guharoy, Ascension Health's vice president of clinical integration and chief pharmacy officer for the Resource Group, agreed that price hikes should be limited to the CPI.

"High drug prices are a huge challenge to deliver care to patients in need," he said. "It's a challenge for providers with limited margins to survive. Sanofi's commitment is good, but we're still far from where we need to be."

Systems, including Ascension, have had to shift treatment strategies to avoid overuse of high-cost drugs—some of which have no viable alternatives.

National healthcare spending grew 5.8% to $3.2 trillion in 2015, in part due to a 9% increase in prescription spending to $324.6 billion.

Branded drugs with no generic alternatives, or single-source drugs, are the main culprit, according to a recent Blue Cross and Blue Shield Association study. They are rising at an average annual rate of 25%, a total of 285% since 2010. These patent-protected drugs now make up 63% of total drug spending, up from 29% of total spending in 2010, despite the fact that they make up less than 10% of total prescriptions filled.

Sanofi said that their average list price increases were 4%, CEO Olivier Brandicourt wrote in an op-ed published on the company's website Tuesday. The company will explain hikes if they outpace medical inflation and will disclose its aggregate gross and net price increases, he said.

Many branded drugs have increased at a much faster clip, including Sanofi's insulin drug Lantus that increased 13% annually from 2010 to 2016.

Allergan said last fall that the Botox maker would stick to single-digit price increases. Novo Nordisk, AbbVie, GlaxoSmithKline and Takeda Pharmaceuticals later followed suit. Eli Lilly said it would lower prices for most of its insulins up to 40%.

"Competition is the answer to a lot of these huge price spikes," said William Woodward, the senior director of sourcing operations for pharmacy at the group purchasing organization Vizient. "Let the market forces work. New drugs are priced at whatever market will bear—it has little or no relation to costs for production or research and development.

There are several bills moving through Congress that aim to reduce drug costs. The CREATES Act and the bipartisan Fair Access for Safety and Timely Generics Act, or FAST Generics Act, target alleged anticompetitive behavior that stifles generic drug development. That alleged behavior includes preventing generic developers from accessing samples of branded products to demonstrate that a generic is equivalent and participating in blocking access to safety protocol needed to gain federal approval. The FAST Generics Act is estimated to save $5.4 billion a year in reduced drug costs.

"Generic drug access needs to be improved significantly," said Guharoy, adding that manufacturers are in short supply while the FDA has a backlog of generics awaiting approval.

Experts also supported reducing or even eliminating direct-to-consumer and direct-to-physician marketing. The pharmaceutical industry spent more than $24 billion to market directly to physicians in 2012 compared with $3 billion that year to consumers, according to a study published that year in the Pew Charitable Trusts.

Sanofi said it hopes its pledge will set a standard for others to follow and ensure affordability and access to healthcare.

"Anything that will bring more transparency to the marketplace is a good thing, it remains to be seen whether this will do it or not," Woodward said.