Regeneron CEO spars with counterparts, calling many price hikes ‘ridiculous’

In a bit of unexpected drama, the heads of several big drug makers were openly lambasted over pricing, but this time, the criticism was leveled by one of their own – Dr. Leonard Schleifer, who runs Regeneron Pharmaceuticals. And the exchange that ensued underscores the challenges the pharmaceutical industry faces in coming to grips with a problem that is unlikely to go away anytime soon.

While speaking at a conference on Thursday, Schleifer said the industry “dispelled” some of the criticism last year by blaming it on “evil doers.” This was a reference to Martin Shkreli, who ran Turing Pharmaceuticals at the time, and Valeant Pharmaceuticals, both of which bought older medicines and then quickly jacked up the prices to sky-high levels. But drug makers should look in the mirror, he argued.

“The real reason we’re not liked, in my opinion, is because, we as an industry, have used price hikes to cover up the gaps in innovation. I may be kicked off the all-star team for saying this, but look at how prices have gone up by double digits, sometimes twice a year,” he said at the Forbes Healthcare Summit, where he was on a panel with other pharma executives to discuss the industry’s battered reputation.

“It’s ridiculous. I hate us also when I see all this stuff,” he continued. “As an industry, we have to innovate and innovate. We all have a great story to tell, but it’s not a sustainable business model to have double digit price increases twice a year.”

His blunt remarks seemed to stun his fellow panelists, who included John Milligan, who heads Gilead Sciences; David Ricks, who is about to become chief executive at Eli Lilly and Jim Robinson, president at Astellas America. Most upset, however, was Ian Read, Pfizer chief executive, who appeared to take umbrage at the accusations and quickly spoke up.

“I totally disagree,” said a dour-faced Read. He retorted that, as a percentage of total health care spending, the cost of medicines has not changed in two decades. “This is a red herring.”

Schleifer, who jokingly picked up his chair and moved slightly away from the others as he sensed the rising tension, quickly fired back. “You’re not entitled to a fraction of the GDP [gross domestic product],” he said. “It doesn’t work that way.”

But Read wasn’t done, either. “I think we have to stop apologizing for great products that we produce… The question is not prices, but the question is affordability,” he said, and then blamed the lack of “a really good insurance system.”

For the record, Pfizer last June increased the list prices of its medicines in the US by an average of 8.8 percent and, back in January, raised prices by an average of 10.4 percent. By contrast, Regeneron has not raised prices for any of its medicines since they were launched, according to Truven Health Economics.

A few minutes later, Schleifer maintained that industry talk of value is misleading. “You can’t say you’ve set a drug at a fair price [when it’s launched] and then have price increases. You can’t have it both ways. It’s covering up for a lack of innovation.”

Read countered, however, that useful data often appears later as a drug is used by many more people in the real world than in clinical trials. And he also argued that, “for the ecosystem, we’ve taken a 2.8 percent net price increase in 2015. I don’t see anything outrageous about that.”

Their exchange didn’t resolve the overarching issue of the rising cost of medicines, but did illustrate how growing concerns among the American public may have started to infiltrate the c-suite, albeit slowly.

Earlier in the day, Allergan chief executive Brent Saunders appeared on a separate panel to discuss drug pricing and used the opportunity to disclose plans to expand a patient assistance program. Three months ago, Saunders issued a manifesto in which he vowed to avoid price gouging as part of a “social contract” with the public. And he promised his company will limit price hikes to single-digit percentages each year, although there may be exceptions for recouping R&D costs, for instance.

“I don’t believe what Allergan is doing is the solution. It’s an important first step,” he told the audience. “But other companies have to follow suit. Allergan itself can’t bend the curve.”

Indeed, but none of the other pharma execs who appeared on subsequent panels at the day-long gathering, including chief executives at Merck, Bristol-Myers Squibb and Celgene, took the same pledge.

Saunders may be trying to lead by example and Schliefer may subscribe to the ‘Emperor Has no Clothes’ theory, but their efforts hardly constitute a game-changing movement.