Pharmas call off price hikes after California law forces new warnings: report

California
Officials in California last year implemented a drug pricing bill that forces companies to give a 60-day warning on some price hikes, including other measures. (Makaristos/Wikipedia)

With a new law requiring drugmakers to provide notice about certain price hikes, California last year joined the group of states taking their own action on drug prices. Now, several pharma companies have canceled previously planned increases after the changes took effect, Bloomberg reports

Novo Nordisk, Roche, Novartis and Gilead have notified California health plans that they're canceling or reducing previously disclosed price increases, according to the news service. The report is based off an anonymous health plan official, but Novo Nordisk, Roche and Novartis have confirmed the decisions. Bloomberg reports that Gilead didn't respond to its requests for comment.

In a statement to FiercePharma, a Novartis representative said "many factors influence our decisions to change product prices for our U.S. portfolio and it is not uncommon for us to adjust plans for price changes." 

After filing a notice of increases on a California government website, he said Novartis "made the business decision not to take planned price increases." The drugmaker "provided an updated notification explaining that we will not implement the changes."

A Novo Nordisk spokesman told FiercePharma the company reduced a planned increase. A Roche representative said the company decided against a 4% price hike on Cathflo after providing an earlier notice. Gilead declined to comment.

Together, the four companies canceled or reduced planned hikes on at least 10 meds, according to Bloomberg, including Novartis' Cosentyx and Gilead's Latairis. 

A representative for industry trade group PhRMA said there's "absolutely no evidence" California's law will lower drug costs for patients. She pointed out that the law doesn't compel middlemen to share rebates regardless of list price changes. Plus, she added, numerous factors go into drug pricing decisions. The group has a pending lawsuit arguing the law is unconstitutional.

The news comes at a tense time for pharma on pricing, a factor that also might have played a role in the decisions. This week, industry giant Pfizer backtracked on dozens of July price hikes after President Donald Trump highlighted the increases on Twitter and said the company "should be ashamed" of its move. Trump spoke with Pfizer CEO Ian Read and the company agreed to defer the hikes, according to a Pfizer statement.

California's new drug pricing law requires drug companies to provide a 60-day notice of planned increases that would take a med's list price up 16% when combined with increases from the previous two years. It also forces companies to justify such price hikes. 

After Gov. Jerry Brown signed the legislation into law, Leerink Partners analyst Geoffrey Porges wrote that the law could create a new de facto price hike limit of 5% in pharma. Alternatively, he said, it could trigger bigger hikes because if companies hit the 16% price hike threshold, they might be incentivized to go "well above" that number.

Still, one expert told Bloomberg the companies could be "throwing up a smokescreen" with their decisions to reduce or cancel price increases. According to SSR analyst Richard Evans, the companies could be seeking to shield details about actual price hikes from competitors or purchasers.

Meanwhile, PhRMA is challenging the California law. The group filed a lawsuit last year arguing the law is “poorly conceived,” “counterproductive” and “unconstitutional." PhRMA said the law “intentionally exports California’s policy choices regarding prescription drug pricing on the entire nation.” 

California officials declined to comment on the lawsuit. The state is among a number that have taken action on pricing in recent years, including Nevada, Oregon and an attempt in Maryland. Maryland officials tried to crack down on "unconscionable" price hikes in the generic sector, but an appeals court later struck down the state's law because it regulates transactions that occur outside of Maryland's borders.

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Editor's note: This story was updated with a statement from PhRMA.