Pharma Prepares to Raise Prices in 2019 With a Wink to Trump

(Bloomberg) -- Drugmakers are getting ready to raise prices Jan. 1 on a broader swath of medicines than in prior years, according to Bernstein analyst Ronny Gal.

In a move to catch up on delayed hikes from 2018, pharmaceutical companies may raise prices on about 20 percent more drugs than last year, with the average price increase for pharmacy-dispensed drugs in high single digits and around 3 percent for those administered by physicians, Gal estimated after talking with insurance carriers and health-plan sponsors.

“Drug companies promised they wouldn’t raise their prices in 2018, which was pretty disingenuous,” said Connecture senior vice president Jim Yocum, who manages price transparency tools for “When the promises were made, it was a, ‘wink wink, nudge, nudge,’ situation to give the administration the response it wanted knowing full well that their next scheduled increase was in January.”

After pharma froze prices in 2018, “now it’s time to play catch up,” said Brian Rye, a senior health-care analyst at Bloomberg Intelligence. “They’re free to raise prices and the president is free to respond to them,” Rye said. “This is going to continue to be an issue going into 2020.”

Pfizer Inc. and Novartis AG have already said they will raise prices by about 5 percent in the U.S. next year. “Given that Pfizer tipped off the market, others will want to ‘bury’ exposure to bad publicity and follow suit,” said Michael Rea, the founder and chief executive of RX Savings Solutions, which collects drug pricing data to help large employers get better deals on medications. “Pfizer tipping their hand plays very favorably to every other manufacturer.”

Richard Evans, an pharmaceutical analyst at SSR, also anticipates that a number of companies that have typically raised prices in January will follow suit. “If you haven’t increased prices yet, but are planning to, you’d certainly be relieved to see other companies get back to business as usual,” he said.

Allergan Plc, Amgen Inc., Bayer AG, Biogen Inc. and GlaxoSmithKline Plc are among 28 drug companies expected to raise prices, according to a Reuters report on Wednesday that looked at records from California’s Correctional Health Care Services.

Drugmakers are required by a California drug pricing and transparency law to notify purchasers if they plan to raise list prices by more than 16 percent over a two-year period.

Pharma may also be limiting high-volume purchases from pharmacies and hospitals trying to stock up on cheaper drugs before the end of the year, Gal said. This in part would limit the impact on earnings by preventing a sales climb in the fourth quarter followed by a first quarter drop, he said in a phone interview.

“While individually companies may do well, the price increases taken together would suggest Pharma is ‘tone deaf’ to public concerns,” Gal wrote. “This is just around the time where the agenda for the upcoming Congress is being defined and action on drug costs is one option.”

See Also: Pharma May Limit Price Hikes to Top-Selling Drugs: Raymond James

©2018 Bloomberg L.P.

BQ Install

Bloomberg Quint

Add BloombergQuint App to Home screen.