Drug Companies Scrap Price Hikes - Blame California, Not Trump

Two days after President Trump threatened to retaliate against drug companies like Pfizer that authorized another round of price hikes this year, a group of drugmakers have signaled that they will roll back some of the increases, blaming a California drug-pricing transparency law that went into effect earlier this year, according to Bloomberg.

The law requires drugmakers to give insurers, consumers and governments to give 60 days advanced notice before planned price increases of 16% or more during a two-year period. The law is intended to help keep prices down by upping the public pressure on pharma companies. And apparently it's working: In the past three weeks, Novartis, Gilead, Roche and Novo Nordisk sent notices to California health insurers announcing that they would rescind or reduce previously announced price hikes on at least 10 drugs.

Novartis

According to Bloomberg, the drugs affected include everything from multibillion-dollar blockbusters like Novartis’s psoriasis drug Cosentyx to niche drugs for pulmonary hypertension and angina. Roche said it would be cancelling a 4% price increase for clot treatment Cathflo Activase.

In early July, Novo Nordisk raised the price of its Victoza diabetes injection by 7.9 percent, and its diabetes drugs Levemir and Novolog by 5 percent, according to data compiled by First Databank and Bloomberg Intelligence. The new price is $293.75 for a 10 milliliter vial of Levemir and $289.36 for a 10 milliliter vial of Novolog. Patients can use more than one vial per month.

According to the health plan official, Gilead canceled planned price increases for four drugs, none among its biggest blockbusters. The company had given notice in May that it would be increasing prices roughly 7 percent on July 1.

One drug company spokesman said Novartis's decision was influenced by "many factors".

"Many factors influence our decisions to change product prices for our U.S. portfolio and it is not uncommon for us to adjust plans for price changes," Novartis spokesman Eric Althoff said in an email. Novartis said it notified some health plans of potential price increases but later decided against implementing them.

However, one activist told Bloomberg that he feared the rollbacks were a "smokescreen" meant to conceal the actual magnitude of their price increases from competitors.

What seems like transparency or falling prices forced by the new law may not actually be so, said Richard Evans, an health and pharmaceutical analyst at SSR in Montclair, New Jersey.

Pharmaceutical companies are likely "throwing up a smokescreen" to conceal the timing and magnitude of their actual price increases from competitors, or from purchasers who might then stock up in advance of an increase, said Evans. He predicted that the law won’t slow the actual rate of actual price increases.

"If what you are trying to do is limit price inflation, this is not the way to go about it," said Evans, whose company provides drug investment research. "This is not going to change mainstream list price behavior at all."

Other drugmakers have raised prices around the same time. Earlier this month, the Financial Times reported that Pfizer had raised prices on about 100 drugs, following a pattern of regular increases that the company takes each year.

Still, Roche is moving ahead with price increases on some of its top-selling cancer drugs. In July, it raised the price of a single-use vial of Herceptin, a breast cancer drug, by 3% to $1,558.42. The price of cancer drug Avastin rose 2.5% to $3,187.76 for a 16-milliliter vial, according to Bloomberg data. The increases followed earlier price hikes in January.

Pfizer announced earlier this month that it would hike prices on 100 drugs, angering Trump, who had promised that drug makers would impose "massive cuts" on drug prices this year.

Even though the drug companies have credited California for inspiring them to roll back the price hikes, President Trump has shown in the past that he's not above taking credit if it makes for a good headline. Now, we wait for the president to respond.