Trump-Inspired Tweets Signal More Drug-Price Pressure

(Bloomberg Opinion) -- There’s a bit of cosmic justice in the fact that attending the pharmaceutical world’s biggest annual confab – the J.P. Morgan Chase & Co. Healthcare Conference in San Francisco – means, in many cases, being charged near-extortionate prices for hotel rooms and amenities. It’s not hard to draw a line to some of the industry’s own practices.

After ramming through New Year’s price increases, drug executives followed up this week with less-than-contrite messaging at the conference, signaling the industry’s reluctance to change in the face of constant criticism. The Trump administration wasn’t happy. On Tuesday, the president reportedly summoned advisers to meet on the issue, and on Wednesday, Health and Human Services Secretary Alex Azar launched a tweet storm to take the sector for its lack of progress. Here is a sampling:

Trump-Inspired Tweets Signal More Drug-Price Pressure

While the 2019 price hikes were less aggressive than in years past, Azar made it clear that’s not good enough. Lower list prices are an aggressive goal, and one that will be difficult to achieve –  and it sets up a very uncomfortable situation for pharma.

Many of the sector’s biggest firms could only manage a few months of the price freezes they committed to last summer after criticism from President Donald Trump. Even moderation may be painful to maintain for an industry that has relied on price hikes to boost growth and secure market access. Plenty of firms face pressure to keep up revenue gains even as key blockbusters age, and that will now be more difficult. 

Trump-Inspired Tweets Signal More Drug-Price Pressure

Allergan PLC has been one this year’s more aggressive price hikers. Executives’ defense of the behavior this week relied in part on a (kept) pledge to keep increases below 10 percent. They also pointed out that a substantial portion of markups flow to middlemen like pharmacy benefit managers in the form of rebates rather than to its bottom line.

Keeping increases below double-digits has never struck me as compelling, especially when hikes are enacted that brush up to nearly touch that ceiling, and it’s a long way from Azar’s demands. And the secretary’s tweets made it clear that he isn’t willing to put all the blame on other actors; patients feel the pain from higher list prices, whether or not rebates are eventually involved, and the industry reaps plenty of profit from the status quo: 

Trump-Inspired Tweets Signal More Drug-Price Pressure

In a pricing panel on Tuesday, Eli Lilly & Co. CEO David Ricks pointed the finger at high-deductible plans for hurting  drug access. He’s not wrong, but the industry arguably has a role in pushing the adoption of such plans and making them more painful by endlessly increasing list prices. In a Q&A the same day, Roche Holding AG’s CFO told conference attendees to expect “evolution” rather than “revolution” on pricing. That isn’t exactly encouraging rhetoric.  

Azar highlighted Amgen Inc., Gilead Sciences Inc., and Merck & Co. on Wednesday as firms that have made progress by lowering list prices. But they’ve done so for just a few medicines that are already heavily discounted. And firms at the JPMorgan conference weren’t exactly lining up to announce plans to follow their lead. 

The criticism isn't confined to the administration. California Governor Gavin Newsom welcomed the industry by announcing planned drug pricing reforms Monday. Republican Senator Chuck Grassley, who is taking over leadership of the Senate Finance Committee, wants to take up several drug-pricing bills. And Congressional Democrats will hold a press conference Thursday morning to announce their own package of drug-pricing bills.

The drug industry can continue to tinker around the edges and cry nuance all it wants. But its reward will be another year of negative headlines and worrisome policy proposals.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Max Nisen is a Bloomberg Opinion columnist covering biotech, pharma and health care. He previously wrote about management and corporate strategy for Quartz and Business Insider.

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