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Drugmakers Cancel Price Hikes After California Law Takes Effect

7/18/2018

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Source: Bloomberg
A handful of the world’s biggest drugmakers are canceling or reducing planned price increases in the U.S., following a new California drug pricing transparency law and continued political pressure over pharmaceutical costs.
The California law, which began to take effect earlier this year, requires drugmakers to give insurers, governments and drug purchasers advance notice of large price increases, as a way of publicly pressuring pharmaceutical companies to keep prices down. In the past three weeks, Novartis AG, Gilead Sciences Inc., Roche Holding AG and Novo Nordisk A/Ssent notices to California health plans rescinding or reducing previously announced price hikes on at least 10 drugs.
The drugs include everything from multibillion-dollar blockbusters like Novartis’s psoriasis drug Cosentyx to smaller products, such as Entresto for heart failure and Gilead’s drugs Letairis for pulmonary hypertension and Ranexa for angina. The changes were described by a health plan official who spoke on condition of anonymity because the information isn’t yet public. Drugmakers confirmed most of the pricing decisions.
“Many factors influence our decisions to change product prices for our U.S. portfolio and it is not uncommon for us to adjust plans for price changes,” Novartis spokesman Eric Althoff said in an email. Novartis said it notified some health plans of potential price increases but later decided against implementing them.
Transparency LawThe California measure, signed in October by Governor Jerry Brown, is among the most aggressive efforts by states to peel back the secretive process of setting drug prices. The law requires pharmaceutical companies to notify insurers and government health plans at least 60 days before planned price increases of more than 16 percent during a two-year period.
It also provides a rare window into the complex U.S. pharmaceutical market, where drugmakers sometimes raise list prices multiple times a year, then negotiate discounts and rebates with insurers and drug plans.
The law is being challenged in court by the drug industry’s lobbying group Pharmaceutical Research and Manufacturers of America. Many drugmakers have been complying in the interim, sending out notices to health plans.
The law’s implementation comes as President Donald Trump, who has accused drugmakers of “getting away with murder,”promised on May 30th that drug companies will voluntarily reduce the price of drugs.


Real Moves?What seems like transparency or falling prices forced by the new law may not actually be so, said Richard Evans, an health and pharmaceutical analyst at SSR in Montclair, New Jersey.
Pharmaceutical companies are likely “throwing up a smokescreen” to conceal the timing and magnitude of their actual price increases from competitors, or from purchasers who might then stock up in advance of an increase, said Evans. He predicted that the law won’t slow the actual rate of actual price increases.
“If what you are trying to do is limit price inflation, this is not the way to go about it,” said Evans, whose company provides drug investment research. “This is not going to change mainstream list price behavior at all.”
Other drugmakers have raised prices around the same time. Earlier this month, the Financial Times reported that Pfizer had raised prices on about 100 drugs, following a pattern of regular increases that the company takes each year.
Swiss drugmaker Roche confirmed that it was canceling a proposed 4 percent price increase for Cathflo Activase, a clot treatment.
Roche has gone ahead with price increases on some of its top-selling cancer drugs. In July it raised the price of a single-use vial of Herceptin, a breast cancer drug, by 3 percent to $1,558.42. Avastin, another cancer drug, went up 2.5 percent to $3,187.76 for a 16-milliliter vial, according to price data compiled by Bloomberg Intelligence and First Databank. The changes follow increases for both drugs in January.
The price hikes were small enough that Roche wasn’t required to send a notification, a spokeswoman for the company said.
Novo Nordisk told California drug purchasers it was also reducing a previously announced price increase, said company spokesman Ken Inchausti. Inchausti declined to name the drug or drugs, and wouldn’t provide details on the price changes.
In early July, Novo Nordisk raised the price of its Victoza diabetes injection by 7.9 percent, and its diabetes drugs Levemir and Novolog by 5 percent, according to data compiled by First Databank and Bloomberg Intelligence. The new price is $293.75 for a 10 milliliter vial of Levemir and $289.36 for a 10 milliliter vial of Novolog. Patients can use more than one vial per month.
According to the health plan official, Gilead canceled planned price increases for four drugs, none among its biggest blockbusters. The company had given notice in May that it would be increasing prices roughly 7 percent on July 1.
Gilead didn’t respond to multiple requests for comment.


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