The impact of legislative and public scrutiny on pharmaceutical price increases

The impact of legislative and public scrutiny on pharmaceutical price increases

In many respects, 2018 appeared as though Donald Trump might make good on his key campaign promise to curb increasing pharmaceutical prices. With public and legislative scrutiny of manufacturer pricing practices continually increasing, the Trump White House released their “blueprint” for addressing rising drug costs, American Patients First. While light on detail and likely requiring legislative action for many of the more substantive elements, American Patients First outlined a general strategy for reform1 (you can read our full analysis here).

Trump then followed up the release of American Patients First with series of tweets aimed at the manufacturer practice of increasing list prices on existing products, with a particular focus on Pfizer— “Pfizer & others should be ashamed that they have raised drug prices for no reason. … We will respond!”2. As a result, Pfizer reversed some of its mid-year price increases and pledged to not take further price increases for the remainder of the year3. Trump praised Pfizer and hailed this as the first of what was to be a massive wave of voluntary price cuts from the pharmaceutical industry. The massive wave of price cuts never materialized but a retrospective analysis conducted by the AP of 26,176 list price changes between 2015 to 2018 found there were fewer price increases in 2018 compared to similar periods in previous years4. Additionally, 24 products decreased their list prices immediately following Trump’s prompting, up from 15 during the same time period in 20174. Was this the first sign of Trump reigning in pharmaceutical prices as promised?

With a new round of manufacturer price increases announced on January 1st, it appears as though the 2018 pricing adjustments may have been temporary. However, public pressure continues to build, and Congress appears increasingly willing to get involved. In addition to legislation introduced this month, House Committee on Oversight and Reform chair Elijah Cummings has opened an investigation into the practice of price increases targeting 12 major manufactures5,6. Any legislative action that may result from the investigation remains unclear but price increases on existing products are likely to remain a salient issue in 2019, particularly as 2020 presidential campaigns kick off and presidential hopefuls look to take a stand on pharmaceutical pricing.

It remains to be seen how manufacturers will respond to this increased scrutiny and if the trend towards fewer price increases in 2018 will continue in 2019. Regardless, the practice of taking annual price increases as a revenue generation strategy is unsustainable in the long-term. Although a product may launch with its price aligned to the clinical and economic value it delivers, after years of price increases, this is no longer the case.  This disconnect between price and value creates a burden on the US healthcare system that has become the focal point for criticism of rising healthcare costs. Whether manufacturers voluntarily shift their pricing practices, or the government intervenes, persistent price hikes are no longer a viable strategy for long-term growth. Going forward, manufacturers should seek to ensure that product price and value are aligned at launch—the days of uncontested price increases are coming to an end.

If you would like to discuss this topic or any other market access related issue, you can contact me at Bill@jupiterls.com

About the authors:

Bill Shimp is a Director in Jupiter’s San Francisco based practice

References
  1. Sweeney, T. (2018 May, 25) Pharma Times. Retrieved from Trump’s drug pricing plan: light on details, heavy on questions: http://www.pharmatimes.com/web_exclusives/trumps_drug_pricing_plan_light_on_details,_heavy_on_questions_1236994
  2. Trump, Donald. @realDonalTrump (2018, July 9) Twitter. Retrieved from: https://twitter.com/realdonaldtrump/status/1016368503723577344?lang=en
  3. Pagliarulo, Ned. (2018, July 11) BioPharma Dive. Retrieved from Pfizer price hikes on pause after Trump pressure: https://www.biopharmadive.com/news/pfizer-price-hikes-on-pause-after-ceo-sitdown-with-trump/527529/
  4. Johnson, L. and Foster, N. (2018, September 24) AP News. Retrieved from AP investigation: Drug prices going up despite Trump promise: https://www.apnews.com/b28338b7c91c4174ad5fad682138520d
  5. Abutaleb, Y. (2019, January 10) Reuters. Retrieved from Sen. Sanders, Rep. Cummings introduce bill to lower U.S. drug prices: https://www.reuters.com/article/us-usa-healthcare-drugpricing/sen-sanders-rep-cummings-introduce-bill-to-lower-us-drug-prices-idUSKCN1P416L
  6. Facher, L. (2019, January 9) STAT. Retrieved from As Congress returns, lawmakers rush to detail drug-pricing agendas: https://www.statnews.com/2019/01/09/as-congress-returns-lawmakers-rush-to-detail-drug-pricing-agendas/