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Seeking to deflect harsh criticism of the pharmaceutical industry, one chief executive officer — Allergan’s Brent Saunders — has taken the unusual step of promising to avoid “price gouging” and agreed to limit price hikes on brand-name medicines.

In a blog post on the company website on Tuesday, Saunders wrote that Allergan — which is probably best known for selling Botox — would not raise prices more than once a year and that any price hikes will be limited to single-digit percentage increases.


And Saunders also committed to avoiding “major” prices hikes without any corresponding increases in costs as products near patent expiration. Drug makers often raises prices as medicines are about to lose patent protection in order to extract as much revenue as possible before generic competition arrives.

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  • It is easy to get around a “social contract” when you’re doing late life cycle management. Not only don’t you have to raise the price but one well worn (but not worn out) strategy is to 1) reformulate your product into a more convenient dosage form 2) gradually draw down inventory of the old product 3) cannibalize the old product at the same time you introduce the “new and improved” product, 4) take advantage of your three year patent extension by jacking up the cost of the new product. Your insurance carrier can’t force a switch to the older cheaper product because it no longer exists. There will be the inevitable hew and cry over “bait and switch” and probably a few lawsuits, but they will take longer to settle than than the remaining patent life. Hope is still there; you can still get your old drug probably from a pharmacy in Kazakhstan.

    Cynical yes, but the idea of “doing well by doing good” died with George Merck.

  • As I read the words of Mr Saunders about ‘the unwritten contract,’ I was reminded of some venerable words. These were indeed written down a good while ago and obeyed or not crystallize how the industry should look at itself. “We believe our first responsibility is to the doctors, nurses, and patients, to mothers and fathers, and all others who use our products and services.”

    Granted, a ‘Credo’ is not a contract but it has a moral force. I assume the words are familiar but if not, search for Robert Wood Johnson, Credo, 1943.

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