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Drugmakers didn’t let up on price increases with the start of a new year, demonstrating the industry’s pricing power in the face of mounting criticisms of prescription costs in the U.S.
Pharmaceutical companies cite high cost of research as reason for price increases
By PETER LOFTUS
Jan. 10, 2016 8:03 p.m. ET
Drugmakers didn’t let up on price increases with the start of a new year, demonstrating the industry’s pricing power in the face of mounting criticisms of prescription costs in the U.S.
Pfizer Inc., Amgen Inc., Allergan PLC, Horizon Pharma PLC and others have raised U.S. prices for dozens of branded drugs since late December, with many of the increases between 9% and 10%, according to equity analysts. The increases are on list prices, before any discounts or rebates that manufacturers sometimes provide insurers and other payers.
Some of the increases add thousands of dollars to the cost of already expensive drugs, and come on top of repeated price hikes in recent years.
Vanda Pharmaceuticals Inc. on Jan 1 raised the price of its new drug Hetlioz, which treats a sleep disorder in blind people, by 10%, to $148,000 a year, a spokeswoman said. Piper Jaffray analysts say the price of the once-daily capsule is now 76% higher than when it was introduced in 2014.
The Vanda spokeswoman said the cost of Hetlioz is “within the price range of treatments that address similar size populations,” noting that fewer than 1,000 patients currently take the drug in the U.S.
Since New Year’s Day, Pfizer has raised list prices an average of 10.6% for more than 60 branded products with annual U.S. sales of at least $10 million, according to Deutsche Bank. Prices for eight of the products went up at least 20%. Pfizer also left prices unchanged for about 10 products.
A Pfizer spokesman said the company offers “considerable discounts” off the list prices, and the company provides medicines for free to patients meeting income criteria.
In recent years, it has been common for drug companies to push through annual price increases in at least the high single digits around Jan. 1 for many brands—and in some cases additional increases throughout the year—analysts said. But this latest round of price hikes is significant in light of the political pressure.
Politicians, health-care payers, doctors and patients have criticized drug pricing in recent months, saying medicines are out of reach for many patients and straining health-care budgets. U.S. prescription-drug spending rose 12.2% in 2014, accelerating from 2.4% growth in 2013, the Centers for Medicare and Medicaid Services said last month. Presidential candidates Hillary Clinton, Bernie Sanders andMarco Rubio have attacked drug prices, and proposed various measures to rein them in.
The new increases despite this criticism “signals there’s still pricing power,” Jefferies analyst David Steinberg said in an interview. “Unlike other countries, there’s no mechanism whereby regulatory authorities can control price.”
Mr. Steinberg said rebates and discounts are likely to partly offset some of the latest price increases, but companies typically don’t make public the magnitude of such concessions.
Repeated increases in list prices eventually can wipe out the value of prior discounts, said Rick Bruzek, vice president of pharmacy services at HealthPartners, a Bloomington, Minn., insurer and hospital operator. “Really, you’re swimming upstream,” he said.
Amgen raised the price of the anti-inflammatory drug Enbrel by 8% in late December, according to Raymond James, following an 8% increase in September and a 10% increase last May. Enbrel costs about $704 a week for the typical dosing for treatment of rheumatoid arthritis, according to CMS, or more than $36,600 a year.
The drug’s new cost is about four times its cost at launch in the 1990s, said Raymond James analyst Christopher Raymond. The price hikes for Enbrel and other drugs “seem to have increased in magnitude and frequency,” he said.
An Amgen spokeswoman said the price of Enbrel reflects its clinical benefits, while helping fund “continued scientific innovation.”
Mary Brainerd, chief executive of HealthPartners, said drug-industry practices “are becoming increasingly intolerable for consumers, health plans, doctors and hospitals.”
Drugmakers say they need to raise prices to fund risky research.Acorda Therapeutics Inc. raised the price of its drug Ampyra, which is used to help multiple-sclerosis patients improve walking, by 11% on Jan. 1, to an annual cost of more than $23,650 a patient.
Acorda offers rebates and discounts off the list price that are likely to cut about 40% from the latest price increase, on average, Chief Executive Ron Cohen said in an interview. The company has raised the price several times since the drug was approved in 2010.
Dr. Cohen said it took more than a decade to develop Ampyra. He said Acorda is developing additional drugs for conditions including Parkinson’s disease. Ampyra generated $315 million in sales for the first nine months of 2015, or 87% of total company revenue.
The price hikes are “our way of insuring that we can survive and develop these programs and bring these new innovative drugs to market,” he said.
Allergan, which has agreed to be acquired by Pfizer for $160 billion, boosted prices by an average of 9.1% for more than 40 brands so far this year, and left unchanged prices for about 20 other brands, according to Deutsche Bank. The increases included 9.9% hikes for eye drug Restasis, the company’s second highest-selling product after wrinkle-smoother Botox, and Namenda XR, a treatment for Alzheimer’s disease. Botox went up 3.8%.
An Allergan spokesman confirmed the price increases but declined further comment.
Horizon Pharma boosted prices for five drugs by 9% to 9.9%, Jefferies said, including ActImmune, a treatment for hereditary diseases. The company’s price increases were the subject of a page-one article in The Wall Street Journal last year.
A Horizon spokesman said pricing for its products “isn’t a key driver” of its business, and that the company provides financial assistance to help patients afford its drugs.
There were some notable exceptions to the price increases. Valeant Pharmaceuticals International Inc., which came under fire last year for sharply raising prices, hasn’t raised prices since September, according to Deutsche Bank.
A Valeant spokeswoman said changes in the company’s product lineup have made pricing a smaller part of its expected sales growth. Valeant canceled nearly all of its planned price increases for the fourth quarter, and expects future price hikes to be more modest, she said.
Write to Peter Loftus at peter.loftus@wsj.com
