Sanofi vows to limit 2017 price hikes to 5.4% as part of new 'holistic' policy

Sanofi's headquarters in Paris
Sanofi CEO Olivier Brandicourt wanted to adopt a price-increase benchmark calculated independently.

Sanofi may be late to the pricing-pledge party, but it’s come up with some benchmarks that could have other drugmakers defending their own. Rather than limiting price hikes to less than 10%, the French drugmaker promises to keep any price increases at or below an official health inflation measure that’s projected to hit 5.4% in 2017.

The company will also report numbers on its aggregate price increases annually, disclosing hikes to gross prices and net prices, which reflect rebates and discounts granted to payers.

Sanofi’s policy, set for release Tuesday morning, follows more than a year of intense scrutiny on pharma pricing in the U.S. as high-profile hikes turned a spotlight on the entire industry. Prompted by leaps in the cost of Mylan’s EpiPen, a set of Valeant Pharmaceuticals’ bought-in drugs, and, notoriously, a massive price hike on Daraprim engineered by then-Turing Pharmaceuticals CEO Martin Shkreli.

The company spent months crafting the new pricing plan, Cybele Bjorklund, Sanofi’s head of global policy, said in an interview. It also includes measures for setting launch prices, with input from outside interests—such as payers and patient groups—that have an obvious stake in that figure.

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One of the key goals, Bjorklund said, was hitting upon the right price-increase benchmark. CEO Olivier Brandicourt wanted to make sure the number “wasn’t arbitrary,” Bjorklund said, and that it was an “independent measure” with a clear rationale behind it.

Allergan, whose CEO, Brent Saunders, was first to release a “social contract” with patients, chose 9.9% as his company’s limit, and Novo Nordisk, Sanofi’s rival diabetes drugmaker, made a similar promise late last year. Since then, AbbVie and Takeda have issued their own edicts limiting price increases to single digits.

Though welcomed by industry watchers, some critics have pointed out that price hikes of that size, compounded annually, still lead to large increases over time.

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Other Big Pharmas, including Johnson & Johnson and Merck & Co., have released numbers showing price increases—gross and net of discounts—across their entire portfolios, but none has done both. Merck's pricing report showed an average list price increase of 9.6% and net price hike of 5.5%, both in 2016. J&J said its net price increases had fluctuated between 2.5% and 5.2% over the last several years. 

Sanofi ultimately picked the National Health Expenditure growth rate, calculated annually by the Centers for Medicare and Medicaid Services, as its guide. “It measures all health spending, rather than just drugs, which usually is higher,” Bjorklund explained, citing the CMS index that zeroes in on prescription drugs as one example.

“We dismissed those as a silo and potentially self-fulfilling,” she said. If it adopted the expected inflation rate specific to meds, Sanofi would be marching in step with industrywide numbers already seen as problematic. “We are committed to being able to say we’ve limited our contribution to inflation,” she added.

The new policy comes as Sanofi, Novo and Eli Lilly—which has set up a discount plan for its insulin treatments—have been challenged in court for insulin price increases that allegedly happened in lockstep over several years. The companies face a class-action lawsuit and antitrust claims. Eli Lilly is also under investigation by two state attorneys general, and Sen. Bernie Sanders and Rep. Elijah Cummings have called on the Federal Trade Commission to investigate the three companies for potential antitrust violations in the insulin market.