Drug price increases lower so far in 2016: Analysts

By Emily Wasserman May 18, 2016 9:15am

Drug price increases are lower so far in 2016 than in 2015, according to a note from Deutsche Bank analysts. The trend comes as some pharma companies such as Valeant ($VRX) face pushback for hiking prices on certain branded meds.

Pharma raised list prices on average by 5% through April 2016, compared to 7.8% for the same period a year ago. Valeant's “significant change in pricing behavior” was a key factor behind this change, analysts said in the note. The company's list price increases dropped to 1.2% in January to April 2016 from 25.8% during the same period last year.

Last month, Bill Ackman--an activist investor and new board member--said at a Senate committee hearing on drug pricing that the company should roll out “socially responsible pricing” for its meds.

Earlier this month, Valeant announced that it would launch an internal committee to oversee its pricing decisions. The committee, led by new CEO Joseph Papa, will take a hard look at pricing for Nitropress and Isuprel, which Valeant hiked by 212% and 525%, respectively. The company recently said that it would offer discounts off the drugs’ list prices to hospitals, though some are complaining that they haven't yet seen those price breaks.

“Valeant has made mistakes in how it priced its drugs in the past, and we are committed to ensuring those mistakes are not repeated,” Papa said earlier this month. “This new committee will take a disciplined approach to reviewing the company’s pricing of drugs, and will consider the impact on patients, doctors and our health care industry partners.”

But Valeant isn’t the only drugmaker charting smaller price increases in 2016. Average list price growth was also lower for companies with large branded drug portfolios, analysts said, including Allergan ($AGN) and Teva Pharmaceutical Industries ($TEVA). Allergan's list price increases were 6.9% from January to April 2016, compared with 7.9% last year. Teva's list price increases were 7.2% this year, versus 8.3% last year.

List price growth for large U.S. drugmakers also decreased in early 2016, the analysts concluded. For that group, the average list price increase through April 2016 was 3.5%, compared with 4.0% for the same period last year.

List price growth was “modestly lower” for companies such as AbbVie ($ABBV), Eli Lilly ($LLY) and Merck ($MRK), analysts said. AbbVie, for example, had list price growth of 2.2% this year compared with 2.3% last year.

But Bristol-Myers Squibb ($BMY) and Pfizer ($PFE) charted more price increases, analysts said. BMS had 3.3% price increase growth compared with 3.1% last year. And Pfizer posted a 9.2% mark, versus 8.5% last year.

There were a couple caveats to the analysts’ findings. Their analysis was only based on list prices, which don’t factor in rebates or discounts that go into final pricing for a drug, they said.

The findings also don’t “consider how reliant companies have been on price for growth in the past, or how changes to pricing behavior could affect future growth,” the analysts wrote in their note. “We are not making any stock calls based on this analysis.”

Drug Prices Valeant Pharmaceuticals