US pricing watchdog spotlights an old pharma trick

Hiking the price of a drug before generics appear is a long-enshrined practice, a situation that applies to most of the products singled out by Icer.

Any concern that Icer might be compromising its integrity by working closer with pharma companies on cost-effectiveness assessments can surely be put to bed with yesterday’s report. The US pricing watchdog's first “Unsupported Price Increase Report” baldly points the finger at seven products that have enjoyed substantial price rises over the past couple of years for which little clinical justification could be found.

Unsurprisingly, the companies involved have widely decried the report, which went so far as to put a number on the excessive costs borne by patients, and the US healthcare system more widely. According to Icer this amounted to $5.1bn over 2016-18, a figure that will provide those campaigning for action on drug pricing a new stick with which to beat the pharmaceutical industry.

Icer looked for clinical justifications for the price rises, but other lifecycle considerations will matter just as much to a company deciding how much to charge for a medicine. In reality, factors like patent life or new competition in the field are probably the biggest influences on a company’s pricing strategy, though of course this message does not play as well when it comes to justifying the value of a drug.

But a look at the products highlighted by Icer shows that, in the period that the watchdog assessed, all were facing either an imminent threat to sales from low-cost competitors or newer therapies. And hiking the price of a product ahead of patent expiry is a long-established practice.

Named and shamed… Icer's naughty list 
Product  Company Q4'16-Q4'18 net price change Increase in spending impact due to net price chg ($m) US sales 2018 ($bn) US sales 2024e ($bn) Note
Humira Abbvie 15.9% 1,857 13.7 10.2 Biosimilars to launch in US in 2023; US sales forecast to peak in 2022
Rituxan Roche 23.6% 806 4.4 1.5 Biosimilars expected to launch late 2019/2020; US sales forecast to peak in 2018
Lyrica Pfizer 22.2% 688 3.6 0.1 Generics launched July 2019; US sales peaked 2018
Truvada Gilead  23.1% 550 2.6 0.2 Generics to launch in Sept 2020; US sales forecast to peak in 2018
Neulasta Amgen 13.4% 489 3.9 1.4 Biosimilar launched June 2018; US sales peaked 2017
Cialis Lilly 32.5% 403 1.1 0.1 Generics launched September 2018; US sales peaked 2016
Tecfidera Biogen 9.8% 313 3.3 1.9 US PTO decision due Feb 2020; US sales forecast to peak in 2019
Total increase in spending over two years 5,106      
Revlimid* Celgene - - 6.5 7.1 Generics expected to launch in 2022; US sales forecast to peak in 2022
Genvoya* Gilead 21.7% 651 3.6 2.3 New HIV quad therapy launched in 2015; US sales peaked 2018
*Drugs with price increases with new clinical evidence, though Icer did not conclude that the evidence justified those price increases. Source: Icer unsupported price increase report, EvaluatePharma for sales figures. 

Lilly, for example, was very motivated to eke what it could out of Cialis: the impotence pill felt the pain of generics in 2017 when Viagra copycats reached the market. A year later Cialis itself lost exclusivity.

The biggest offender, Abbvie, has never been afraid of price hikes and so Humira’s presence on this list should not come as a surprise. The company made it clear that, in the wake of an aggressive price cut in Europe to defend market share, Humira’s US price would continue to rise (Abbvie manoeuvres to defend Humira to the last, November 7, 2018).

It should also be noted that Icer's report identified 26 drugs whose prices fell during this period. The biggest faller, Sanofi's Lantus, saw its spending impact due to net price change decline $1.3bn.

Generic competition

Celgene is presumably pursuing a similar strategy to Abbvie with Revlimid, which has started to see some generic competition in certain European countries before an expected launch of copycats in the US in 2022. 

Amgen too has for years been relying on price hikes to deliver growth in its Neulasta franchise. In a report last year Leerink analyst Geoffrey Porges estimated that between 2014 and 2017 price increases boosted the product’s sales despite falling volumes (Price hikes are dead – long live price hikes, October 11, 2018).

It is also not surprising that Biogen has taken the opportunity to hike Tecfidera while it can. A crucial patent hearing in February next year will rule on the MS drug’s exclusivity, and if the decision goes against the biotech company generics could enter in 2021.

It is unlikely that a robust defence of these price hikes will be heard from those not employed by the pharmaceutical industry, and there seems to be broad consensus in the US that its healthcare system is simply too costly. Whether one agrees with Icer’s methods or not, investigations like these are probably the only way to change pricing practices.

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