Drug pricing woes ease a bit, wholesaler AmerisourceBergen's Q2 indicates

Pills in dollar sign
Wholesaler AmerisourceBergen in earnings today said that it expects branded drug prices to rise 7% to 9% this year and generic prices to fall by the same percentage range.

Their position in the supply chain allows drug distributors to be a broad indicator of what is happening with drug prices in the U.S., and today AmerisourceBergen said the industry can expect branded prices this year to continue to rise 7% to 9%, while generics prices will continue their downward slide, off 7% to 9%.

Those projections came as the Valley Forge, Pennsylvania-based wholesaler today reported second-quarter financials in which it earned $1.77 per share, which Reuters said bested an average analysts' estimate of $1.68. Revenue, up 4% at $37.2 billion, fell beneath analysts' estimate of $38.1 billion.

The company said it now expects 2017 revenue growth in the range of 5.5% to 6.5%, which is below its previous guidance of of 6.5% to 8%. But it still raised the bottom end of its earnings forecast to $5.77 to $5.92 per share from its previous $5.72 to $5.92.

“AmerisourceBergen is consistently delivering solid performance in a challenging marketplace,” CEO Steven H. Collis, said in a statement.

That challenging marketplace has been affected by intense generic competition that has resulted in falling prices and a intense public, and political, scrutiny of drug price hikes, which have led branded drugmakers to ease up the gas pedal on customary price hikes. A number of companies have pledged to keep price increases annually in the single digits.

Because distributors' payments for delivering drugs are based in part on a percentage of revenue managed and delivered, when prices fall or moderate, it has a negative effect on their earnings. Last year, wholesalers were caught off guard by slowing branded drug prices, leading AmeriSourceBergen and chief rivals McKesson and Cardinal Health to surprise the markets with earnings revisions.

On Monday, Cardinal Health reported better-than-expected profits and noted that generic drugmakers have been holding prices steady for several months, Reuters said.  

According to Reuters, Leerink Partners analyst David Larsen said the fact that AmerisourceBergen left its drug pricing forecast unrevised is a good sign for fiscal 2018 expectations.