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June 10, 2017 01:00 AM

Editorial: The drug industry's irresponsible price hikes

Merrill Goozner
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    Merrill Goozner

    When an individual or organization is under public assault, it pays to heed the advice of the crisis consultants. Stop doing what got you in trouble, be contrite, and start acting in a socially responsible manner.

    No, this week's column isn't about President Donald Trump.

    I was moved to look up the typical advice offered by PR crisis managers after learning that Pfizer in early June raised its prices by an average of 10%, according to the Financial Times. It also raised prices about 10% across-the-board in January.

    Pfizer sells about 100 different products and posted about $50 billion in sales last year. This isn't some rogue hedge fund manager like Martin Shkreli. Nor is it some generic profiteer like EpiPen manufacturer Mylan, which has been sued by 15 state attorneys general for price gouging.

    This is the biggest player in the industry imposing huge, unexplained price increases. "Pfizer has always priced responsibly," a company spokesman said.

    Its latest financials provide some clues to its motivation. Company revenue declined by 2% in the first quarter, largely due to declining sales of its biggest selling product, the pneumonia vaccine Prevnar. Seniors had rushed to get the shot after the CDC recommended it in 2014, but that pent-up demand has now evaporated.

    Yet Pfizer's profits rose to 24.4% of sales, up a full percentage point from a year earlier. R&D spending–the lifeblood of the innovation it claims to be pursuing–was cut by $23 million in the quarter to remain at 13.4% of sales.

    PhRMA, the industry trade group, has gone to great lengths to dissociate itself from rogue players. But here we have the industry's leading player thumbing its nose at a public that last December said rising drug prices was among its top concerns, cited by 61% of respondents according to a Kaiser Family Foundation poll.

    A quick aside: Repealing the Affordable Care Act was a top concern for only 37% of respondents in that poll. Those numbers would be even more stark today. The latest Gallup tracking poll shows the ACA now has a 55% approval rating, up 13 percentage points since the election.

    Will Pfizer and the other major drug manufacturers pay a price in Washington for willfully ignoring the national imperative to keep healthcare costs under control? While efforts to replace the ACA continue to occupy center stage, the drug industry has managed to deflect attention from its predatory pricing policies by focusing public attention on the lower profits earned by pharmacy benefit managers.

    In fact, their campaign has been so successful that the role of the drug supply pipeline will be the subject of a Senate Health, Education, Labor and Pensions Committee hearing on June 13. Let's hope it isn't just Sen. Bernie Sanders (I-Vt.) asking questions about the prices of brand name drugs flowing through that pipeline.

    Meanwhile, bills that would introduce greater competition in the drug market, whether by allowing imports, giving Medicare the right to negotiate prices or requiring firms to justify price hikes over 10%, go nowhere. The president, who routinely expresses outrage over drug prices, is preoccupied.

    Some conservative lawmakers, on the other hand, are moving to attach legislation to the pending Food and Drug Administration user-fee acts that would make it easier for drug companies to promote the off-label use of drugs. This would only exacerbate the drug spending problem.

    Bills that set application fees for manufacturers of new drugs, biologics, generics and devices must pass before the August congressional recess. Otherwise, layoff warning notices will start going out to thousands of FDA employees who depend on those fees for their salaries.

    The first five-year user-fee bill passed in 1992. Subsequent bills have sailed through Congress with bipartisan backing. Now, some Democrats are threatening to withhold support if the rules governing off-label promotion are weakened.

    They should. And they should tack on some price increase transparency language while they're at it. There needs to be a price put on irresponsible behavior.​

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