Healthy Skepticism Library item: 13363

Warning: This library includes all items relevant to health product marketing that we are aware of regardless of quality. Often we do not agree with all or part of the contents.

Publication type: news

Big drug makers raising prices on their best-sellers
Associated Press 2008 Mar 27
http://www.newsobserver.com/business/story/1014593.html

Full text:

NEW YORK – Pfizer and GlaxoSmithKline, the world’s largest drug makers, 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, the financial information provider. Industrywide, 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 it posted last year when prescriptions declined for its best-seller, the cholesterol pill Lipitor. GSK’s price bump kept its U.S. sales from dropping more than 10 percent.

Critics say that inflating wholesale charges isn’t a sustainable strategy for masking a company’s failure to discover novel drugs.

“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. “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 100,000 drugs is published by Thomson in a monthly publication called the Red Book Update. The prices don’t include discounts or rebates to insurers and U.S. government plans, which drug makers say they don’t disclose.

GSK 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. Pfizer said its 2007 increase was between 8 percent and 9 percent.

The drug makers say they are increasing prices to compensate for the rising cost of discovering new drugs and revenue lost to generic competition.

“There continues to be a dearth of innovation,” said Michael Castor, a managing partner at health-care investment fund Sio Capital Management in New York. “Price increases are one mechanism to help offset the gap, but only in the short term.”