Lilly CEO: With pharma friends in high places, it's 'time for action' to ease drug costs

SAN FRANCISCO—Merck & Co.'s top executive said Monday that pricing pressure isn't likely to get worse. But Eli Lilly CEO David Ricks begs to differ.

The industry needs to address the pricing criticism directly or it will face consequences, Ricks said Tuesday at the J.P. Morgan Healthcare Conference. Continually pointing to pharma's contributions to science—which are many—will wear thin without action on costs, too.

"I think we have done some things that have been good but we need to do more," Ricks said. "If you look at where we are as an industry, there has never a better time for science … that's the good news." 

But the industry "can't just keep saying that and do nothing on the affordability side. We need to do more. If not, people will do things for us," the helmsman said. 

Pharma's pricing has been under fire for years but controversies brought the issue to the forefront in 2015. At the same time, payers have clamped down on the industry's new launches and forced drugmakers to prove their drugs add value to the system, while politicians repeatedly have promised to crack down on price hikes and rein in drug spending. 

At Tuesday's JPM fireside chat, the Lilly CEO praised moves by FDA commissioner Scott Gottlieb to boost competition. Right now, there are "people who are in power who understand that tricky balance, that fragile balance between reward for innovation and access," he said. 

"We better take advantage of that," Ricks said. This year is the "time for action" on pricing, he added. 

What solutions would Lilly like to see implemented? Ricks offered two: value-based pricing for pharmaceuticals and rebate passthroughs to patients. Currently, patients don't benefit from tough negotiations that go on behind the scenes between payers and pharma. 

The discussion came as former Eli Lilly U.S. president Alex Azar seems to be set for confirmation as HHS secretary, according to Politico. Despite calls for action on pricing in Washington, Congress hasn't progressed on the issue. Some states have taken the issue into their own hands and many others are weighing proposals.

In response to the drumbeat of pricing criticism, drugmakers have sought to highlight the role middlemen play in drug pricing and to shine light on the growing rebates and discounts paid out to the supply chain. Lilly itself released a transparency report last year showing that—on a portfolio level—it's cutting 50% off its list prices.  

All told, the company raised prices by 14% on average before discounts last year, but only realized 2% of that total due to tough payer negotiating, the company said. 

Lilly was among a group of Big Pharma companies that implemented price hikes in either late December or to start the New Year. The drugmaker raised its list price on a dozen meds between 1.5% and 9.91%, according to MediSpan PriceRx data highlighted in a recent Wells Fargo analyst note. Among the drugs to get list price hikes above 9% were antidepressant Cymbalta, antipsychotic Zyprexa and osteoporosis med Forteo.