Healthy Skepticism Library item: 13318
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Publication type: news
Pettypiece S.
Pfizer, Glaxo Raise Prices as Drug Growth Declines
Bloomberg News 2008 Mar 26
http://www.bloomberg.com/apps/news?pid=20601103&sid=aHq9.4jizbSQ&refer=us
Full text:
Pfizer Inc. and GlaxoSmithKline Plc, the world’s largest drugmakers, are raising prices to boost revenue as prescriptions slow on their best-selling medicines.
The companies increased U.S. wholesale prices about 9 percent on their 10 top-selling medicines in 2007, more than twice the 4.2 percent rise in the U.S. consumer price index, according to data collected by Thomson Corp., the Toronto-based financial-information provider. Industry wide, prices have climbed 50 percent since 2003, according to AARP, the advocacy group for the elderly.
If not for the increases, Pfizer’s U.S. revenue would have fallen more than the 10 percent drop posted last year when prescriptions declined for its best-seller, the cholesterol pill Lipitor. Glaxo’s price bump kept its U.S. sales from dropping more than 10 percent. Inflating wholesale charges isn’t a sustainable strategy for masking a company’s failure to discover novel drugs, industry critics say.
``The only way they can keep up their financial picture is to raise prices on the current drugs,’‘ said John Rother, director of public policy for AARP, a non-profit group based in Washington that represents people aged 50 and over. ``That is a short-term strategy, but that seems to be what they are doing because they don’t have new products.’‘
The list of average wholesale prices of more than 100,000 drugs is published by Thomson in a monthly publication called the Red Book Update. The prices, often called AWP, don’t include discounts or rebates to insurers and U.S. government plans, which drugmakers say they don’t disclose.
`Dearth of Innovation’
Glaxo said its calculation of the price increase on its top 10 drugs was 4.3 percent. That figure includes drug dosages and package amounts not listed in the Red Book. New York-based Pfizer said its 2007 increase was between 8 percent and 9 percent.
The drugmakers say they are increasing prices to compensate for the rising cost of discovering new drugs and revenue lost to generic competition of big-selling products.
``There continues to be a dearth of innovation,’‘ said Michael Castor, a managing partner at health-care investment fund Sio Capital Management LLC, in New York. ``Price increases are one mechanism to help offset the gap, but only in the short term.’‘
Smallest Gain
Pfizer fell 9 cents to $20.69 at 4 p.m. in New York Stock Exchange composite trading. Pfizer shares have fallen 19 percent in the past 12 months. Glaxo fell 28 pence, or 2.6 percent, to close at 1,046 pence in London. Its shares have declined about 25 percent since March 2007.
Last year, U.S. pharmaceutical revenue grew 3.8 percent to $286.5 billion, the smallest percentage gain since 1961, according to IMS Health Inc. in Norwalk, Connecticut. The figure would have been even lower if not for price increases, which were 7.4 percent on the top 220 brand-name drugs used by the elderly and disabled in the government’s Medicare program, AARP said in a March 5 report.
Only 19 new drugs were approved by U.S. regulators, the fewest in 24 years, according to Tufts Center for the Study of Drug Development at Tufts University in Boston. Without novel treatments that merit higher prices, drugmakers must rely on price increases to keep revenue steady, analysts say.
Glaxo and drugmakers officials say the U.S. Food and Drug Administration may have toughened approval standards after Merck & Co.‘s painkiller Vioxx was removed from the market because of side effects. The FDA denies it has altered policies. Sales also are being lost as patents expire and the FDA places new warnings on older drugs, analysts say.
New Project Funding
``You have to recover your costs and with the generic erosion it is even more critical to invest in R&D,’‘ Glaxo spokeswoman Nancy Pekarek said in an interview. ``Development costs are a major factor in the pricing.’‘
Pfizer said at a meeting with analysts March 5 that it will seek approval for as many as 20 products from 2010 to 2012, while London-based Glaxo has said it expects to introduce 25 products starting in 2012. Both companies say revenue from the higher prices will fund testing of these new treatments and they have programs to make drugs available to people who can’t afford them.
``Pfizer has a well-established history of moderate pricing versus competitors in the U.S. market particularly when you consider that the vast majority of our customers receive some type of legislated or negotiated discount off our announced list prices,’‘ said Pfizer spokesman Ray Kerins in a statement.
Bristol-Myers
Bristol-Myers Squibb Co. in New York said its 7 percent increase in U.S. sales was helped by higher prices as prescriptions for its drugs fell 4 percent last year, according to a 2007 regulatory filing. Worldwide revenue for Bristol-Myers rose 12 percent to $19.3 billion. Two percentage points of that was from price increases, the drugmaker said.
Outside the U.S., drugmakers are less able to raise the amount they charge because a drug’s price is regulated by governments that pay for health-care services
The Pharmaceutical Research and Manufacturers of America, the drug industry’s U.S. trade group based in Washington, said the price of drugs continues to increase because only one in five new medicines earns enough to pay for the average cost of development.
