No price relief in 2019, Pfizer confirms

The person in Pfizer’s biggest corner office has changed, and so has the message. A year ago Ian Read insisted that the value of the big pharma’s drugs justified rising prices. Today his successor as chief executive, Albert Bourla, says prices will not rise in the US and will shrink overseas, acknowledging a political reality that will limit the growth of the company – and perhaps of the entire sector – in 2019.

Followed by Johnson & Johnson’s statement last week that it, too, expects a gloomy pricing outlook, the sector must be girding itself for a tough year after a 2018 that offered little in the way of relief. Marketing campaigns seeking to emphasise the cost of medical innovation seem to have gained little traction, and the industry’s leaders must now be pondering a strategic shift to take the pressure off.

Volume, volume, volume

Several companies, Pfizer included, managed to take the opportunity at the turn of the year to give a boost to prices of some of their drugs, Allergan famously complying with its sub-10% pledge by giving seven products 9.5% hikes (JP Morgan preview – price hikes come back with a bang in 2019, January 2, 2019). But the emerging message from the industry’s leaders is that revenue growth will need to come from volume, not price, unless one is fortunate enough to have an innovative pipeline project ready for launch.

This is not a description that fits Pfizer. Lyrica, a $5bn product, comes off patent this year, an event that will force the group to reset once again until 2021. A big R&D growth driver, tanezumab, has enough safety worries surrounding it to raise questions as to what its ultimate potential might be; rapidly progressing osteoarthritis is reported in 2.1% of cases, and a single case of osteonecrosis was disclosed in a phase III arthritis pain trial toplined today.

And, of course, Pfizer is known more as a company that buys growth than one that builds it. But, even then, the change of rhetoric in the past year has been notable. Mr Bourla insisted in Tuesday's year-end earnings call that the company did not want a major acquisition that would distract its research department – and potentially dilute its investors – as opposed to Mr Read’s proud statement in 2018 that Pfizer would be at the “forefront” of action in the next M&A wave.

How long to lie low

So, Pfizer is strategically hemmed in, with prices rises largely ruled out, and pipeline and new product growth not expected to begin making up for Lyrica until 2021 at the earliest. Given a public declaration that M&A is not on the cards, what can the company do?

The first of these is in part a political problem, and one that does not look like it will go away any time soon, certainly not at least until November 4, 2020. This means lying low for almost two more years, risking investor flight if volume cannot make up for prices, and perhaps making it even more difficult to resist calls for a strategic acquisition.

It also raises the question of why the industry’s efforts to play up the value of innovation, and the need to pay for it, have failed to make a dent in public opinion. With another year of holding the line ahead, Mr Bourla, J&J’s Alex Gorsky and other leaders need to start asking if compromise with payers and politicians could at least gain them the flexibility to achieve smaller if more consistent price increases in coming years.