Pharma companies ended 2017 with prices down, not up, according to analysts at SSR Health. Net prices—after rebates and discounts—slipped 1.1% in the fourth quarter, the analysts calculated, despite overall list price increases of 5.5%.
But some companies were able to squeeze out significant price gains, the SSR report shows. And a couple depended on those gains to pump up sales in the U.S.
Celgene's blood cancer treatment Revlimid, AbbVie's immunology therapy Humira, Roche's cancer meds Rituxan and Avastin, and Novo Nordisk's diabetes drug Victoza contributed the most to net price increases, the analysts found. Gilead Sciences' hepatitis C antivirals Epclusa and Harvoni were among a group of drugs whose net prices slid the most, along with Johnson & Johnson's psoriasis treatment Stelara, Sanofi's basal insulin Lantus and Novo's fast-acting insulin Novolog.
Price hikes actually fueled the vast majority of U.S. sales growth for Celgene and AbbVie. Revlimid's net price gains gave Celgene 78.6% of its growth in the U.S. during Q4, while a staggering 99.3% of AbbVie's growth came from higher Humira pricing, SSR found.
Looking ahead, the analysts see a risk of payers getting tough on Humira and implementing an "aggressive U.S. formulary policy under which newly diagnosed patients are placed on alternative anti-TNFs." In that case, they said, AbbVie might react by lowering its rebates, which would result in higher costs for patients.
"We believe formularies have the realistic option of raising existing Humira patients’ out-of-pockets if [AbbVie] reduces rebate percentages, and giving these patients the option of moving to a competing product" at lower out-of-pocket costs.
Meanwhile, Celgene's Revlimid plays a "key role" in each disease area it treats—multiple myeloma, autologous hematopoietic stem cell transplants and myelodysplastic syndromes—so "demand is clearly price inelastic," the analysts wrote. They figure the company "plainly can continue inflating Revlimid’s net costs."
But if Celgene decides to take that route, "Revlimid’s price becomes an increasingly large outlier relative to various benchmarks, increasing social and political pressure on the firm."
Celgene already took its most aggressive price hikes ever for the drug in 2017, raising its list price by 19.8% via two separate increases, according to SunTrust analyst Yatin Suneja. Many drugmakers have pledged to keep price hikes to less than 10% each year.
While AbbVie and Celgene were able to achieve higher pricing in the quarter, that wasn't the case for every pharma player. AstraZeneca, Merck and Sanofi struggled in the U.S. during the period as key meds Symbicort, Januvia and Lantus each suffered net price declines. And the problems aren't over—looking ahead, the SSR team said it anticipates "net prices for these brands to fall much faster than consensus expects."
In a recent transparency report, Merck disclosed its prices after discounts slipped 1.7% in 2017. Johnson & Johnson said it offered up $15 billion in discounts and its average net prices fell by 4.6% during the year.
As drug pricing criticism has intensified in recent years, drugmakers have argued that pharma middlemen are demanding a bigger share of spending in the form of rebates and discounts. Payers and PBMs say their negotiations save the healthcare system billions of dollars and that drugmakers set their prices. But in a battle between payers and pharma over list price hikes and growing rebates, patients are often caught in the middle because the amount they pay is based off a drug's list price.