File this under “What controversy?”
Last week, Pfizer (PFE) increased the list prices of its medicines in the United States by an average of 8.8 percent, according to an investor note by Morgan Stanley analyst David Risinger.
This marks the second time this year that the drug maker has substantially boosted prices for its prescription drugs. Back on Jan. 1, Pfizer raised prices by an average of 10.4 percent, Risinger pointed out.
However, he noted that these increases do not reflect any rebates or discounts. After taking those price breaks into account, in fact, Risinger estimated that the actual “net price growth” was slightly less than half of the increases in the list prices.
What is unclear, however, is how much of those rebates and discounts are then passed along by pharmacy benefit managers and health plans to their clients, which would include companies and unions, for instance. In any event, many people with health insurance are likely to see higher costs as they are asked to absorb a portion of rising prices.
The data for price hikes on Pfizer individual drugs were not included in the Morgan Stanley note, and the brokerage firm declined to provide that information. A Pfizer spokesman wrote us that, last year, the company paid about $4.6 billion in rebate to Medicare, Medicaid and commercial insurers. “Some of our most widely used medicines including Lyrica, Xalkori, Ibrance and Prevnar will not have an increase,” he added.
The Pfizer move comes amid rising controversy over prescription drug pricing.
Over the past few years, the increased cost for a variety of medicines has prompted outrage over the extent to which Americans can afford their medicines. Although the focus has largely been on newer medicines for such hard-to-treat diseases as hepatitis C and some forms of cancer, concern has also extended to some generic drugs, which have traditionally been lower-cost alternatives.
The issue exploded last year, however, after two companies — Valeant Pharmaceuticals and Turing Pharmaceuticals, which was led at the time by Martin Shkreli — were vilified for a strategy of buying medicines and then jacking up prices by sky-high percentages. Those tactics prompted congressional scrutiny and made drug pricing a talking point in the ongoing presidential campaign.
The infamous examples included a 525 percent price hike on the Nitropress heart drug, which is used by hospitals, by Valeant on the same day that it bought the medicine. And Turing boosted the price of a life-saving medicine generally used by HIV patients by roughly 5,000 percent — from $13.50 a tablet to $750 — shortly after buying the drug.
Amid the furor, many of the world’s largest drug makers have argued that their playbook is different. These companies have maintained that they do not rely on such huge price hikes to sustain growth and, importantly, funnel a notable chunk of their revenue into research and development.
Nonetheless, Pfizer is boosting prices by notable amounts on a regular basis, according to Morgan Stanley.
On June 1, 2015, the drug maker raised list prices by an average of 8.5 percent after boosting prices by an average of 8.8 percent on Jan. 1, 2015. Back on June 1, 2014, the company raised prices by an average of 7.4 percent. As Risinger noted, the prices hikes are “consistent with historical action despite political media noise regarding US drug pricing.”
It is unclear if these price increases — which have, indeed, occurred on a regular basis — will spark any further concerns about industry practices. It is certainly true that an 8 percent or 10 percent price increase every six months is far less than a 500 percent or 1,000 percent price jump. Then again, the cumulative effect adds up – for Pfizer’s treasury and the consumer pocketbook.