KEY TAKEAWAY: Big Pharma was handed a rare loss as Congressional leaders moved to pass the $1.3 trillion omnibus budget. Lobbyists for the pharmaceutical industry have been camped out on Capitol Hill this past month working legislators to change new policies tied to payment obligations attached to Medicare Part D, the so-called Donut Hole. The changes call for the financial liability covered by insurance carriers for prescription drugs not covered by Medicare to shrink, while that obligation rises for pharmaceutical companies. For drug makers, their share of discount rises from 50% to 70%. Lobbyists had been trying to push those numbers down to 60%.
An analysis from Pharmacy Benefit Consultants show that from January 2017 to this month, 20 drugs jumped 200% and another 39 drugs saw their price increase 100% . In all, 400 drugs had average wholesale price increases between 25% and 50%. Pfizer Inc. had a wealth of drugs increasing between 22% and 43%, according to the Pharmacy Benefit data as they had to pay for the lucrative package just awarded to their CEO.
What’s going on here?
Let’s see, drug companies have been increasing prices, pharma CEO’s are still receiving compensation that’s through the roof and despite the “noise” about third parties responsible for the high cost of drugs in the media has been doing a great job at funneling consumer anger towards pharma. In other words:
The current business model of pharma companies in not sustainable
GSK has seen the future and is challenging their people to cut budgets across the board by 20%. Marketing will only be used for NEW products and you can bet that soon layoffs are going to follow.
The other key driver is the cost of health insurance. Now that people are paying more they want more which includes becoming consumers of health care.
Most pharma companies are going to use the head in the sand approach to new business challenges, after all CEO’s can take their millions, buy a mansion and leave the turmoil behind. However, the good people who believe in what they are doing are going to see the screws turned even more.