Hiking drug prices to boost sales is a strategy that's been working--but it can't last. That's what pharma industry executives have been saying this week at the Reuters Health Summit. As Bain & Co.'s healthcare chief Tim van Biesen said at the summit, "The industry has been in volume decline for three years--it's been propped up on price. You have to ask how long that can continue."
Companies have been raising prices--sometimes substantially--to help make up for a lack of new products and to squeeze as much revenue as possible from brand-name drugs that are soon to go off patent. Pfizer's Lipitor, which goes off patent in November, saw a price increase of 11.4 percent last year, compared with 5 percent over the previous five years.
"As their branded drugs approach the patent cliff, there has always been the tendency to see increased pricing toward the end, just to get the last dollar out of every drug before they lose brand protection," Medco Health Solutions CEO David Snow said (as quoted by Reuters). And as Shire Chief Angus Russell said, "Prices [for mass-market drugs] were just shoved up every year to make more money and meet earnings, to be blunt."
As Reuters notes, GlaxoSmithKline CEO Andrew Witty (photo) recently observed that price increases have been "really high" lately. And he figures that those increases will have their consequences. "We think it is probably not the right moment for people to be taking crazy price increases," he said. "We think ultimately that is going to come back to bite."
- read the Reuters news