Has the Brent Saunders price-hike limit become a de facto pharma rule?

Brent Saunders headshot
Allergan CEO Brent Saunders' pledge to limit price hikes has distinctly affected the industry's pricing practices, data from Bernstein show.

Nearly one year ago, as the pharma industry was beset by pricing scrutiny, Allergan CEO Brent Saunders pledged to keep his company’s hikes under 10%. Since then, that pricing rule has spread—even among companies that haven't publicly promised to do the same.

Bernstein analyst Ronny Gal reports that for 92 drugs his specialty pharma team tracks, none has posted price increases higher than 9.9% so far this year.

“It seems that officially, or unofficially, most drug companies have adopted the policy,” Gal said in an interview, noting that this year’s increases have been “clearly lower than years past.”

The drugs are from 11 specialty pharma companies, including branded drugmakers Merck KGaA, Shire, Novo Nordisk and Amgen, as well as Teva and Mylan, companies that mostly make generics but also sell some branded drugs. It was Mylan's branded EpiPen autoinjector whose price hikes set off the firestorm that ended up spawning Saunders' pricing pledge.

Prices on 30 of the meds have gone up between 9% and 9.9% so far this year, according to Bernstein's data, while 40 have had price hikes between 8% and 9.9%. The figures could climb higher as the year goes on. The data don't include info from larger drugmakers such as Pfizer, Roche and Johnson & Johnson.

RELATED: Allergan CEO swears off big price hikes in manifesto on pharma's 'social contract'

Notably, after raising the price on EpiPen by 15% twice each in 2014 and 2015, Mylan hasn’t taken a price increase on the epinephrine injector since May of last year, Bernstein's data show. Years of price hikes on that med put a spotlight on Mylan—whose CEO testified before Congress—while other companies such as Valeant and Turing Pharmaceuticals played a role back in 2015.

Amid the backlash, large drugmakers sought to distance themselves from “bad actors” in the field. Saunders couched his pricing commitment as part of a "social contract" between pharma and society, and, as the controversy grew, he argued that the industry should police itself or risk a regulatory overhaul.

Nearly a year later, Gal said companies have signed up for the single-digit rule because “it works.”

“I’m guessing it will stay here until the noise comes down,” he said. “Then, someone will take a step up and if there’s no response, more people will do it.”

RELATED: Eli Lilly says it's cutting an average of 50% off list prices—and its price hikes don't work

Drugmakers including Novo Nordisk, AbbVie and Takeda quickly jumped on board with the Saunders pricing pledge, while Sanofi recently committed to limiting hikes to the level of official health inflation, projected to be 5.4% in 2017.

Elsewhere in the industry, Johnson & Johnson, Merck and Eli Lilly have released high-level information about pricing, demonstrating a trend toward higher rebates to pharmacy benefit managers. Eli Lilly, for instance, reported that an average 14% list price hike across its portfolio for 2016 amounted to a net hike of just 2.4% after rebates.

To some degree, drug pricing talk has quieted in Washington, D.C., as no new controversies have fueled the issue in recent months. Reports that the Trump administration’s approach to pricing would favor the industry also helped lift investor concerns.