KEY TAKEAWAY: According to Credit Suisse “US drug price rises contributed 100% of industry EPS growth in 2016”.
Even though prescription drugs constitute only 11% of US health expenditures, according to the Centers for Disease Control and Prevention and Centers for Medicare and Medicaid Services,and US drug spending ranks in the bottom one-third of comparison lists with other developed nations, prices continue to increase rapidly here, with a year-over-year rise of almost 10% for drug list prices, according to a 2017 Credit Suisse report.
[inlinetweet prefix=”” tweeter=”” suffix=””]The hidden truth is that prices vary tremendously between drugstores for the same exact drug[/inlinetweet], yet patients are not sufficiently incentivized to alter buying patterns. In a December 2017 Consumer Reports study, the national average price between different retailers for a one-month supply of five common generics ranged by up to a factor of 20; for example, the generic version of cholesterol-reducing Lipitor ranged from $12 or $13 at HealthWarehouse.com or Sam’s Club to $242 at Kmart.
But despite the noise blaming others for the prices of prescription drugs pharma is still raising prices every year as it has done in the past. The pharmaceutical industry has not changed its pricing practices, despite the Trump administration’s rhetoric about cracking down on high drug prices.
High-cost, high-use prescriptions like Humira, Enbrel and Revlimid. [inlinetweet prefix=”” tweeter=”” suffix=””]AbbVie hiked the price of Humira, the highest-selling drug in the world, by 19% over the 14-month period[/inlinetweet], and Amgen did the same for Enbrel. Celgene raised the list price of Revlimid by 20%.
This model cannot be sustained.
In January, GlaxoSmithKline’s new head of pharmaceuticals Luke Miels issued a blunt challenge to his managers: find budget savings of 20 percent. Miels declined to comment in detail on his budget demand, including the savings figure of 20 percent, but confirmed the strategic goal of achieving a leaner, meaner commercial footprint to match a recently pared-down research and development operation. Is this just the start?
I see pharma companies wasting a lot of money everyday. For example, a pharma company recently sent out desktop cards to over 400 sales people via Fed-X overnight and these were cards that the sales people said “their customers would never use”.
Then there are myriad of meetings and conferences that pharma companies send people to often at the cost of over hundreds of thousands of dollars when you count hotel, air fares and per diem.
In DTC I still see pharma companies wasting a ton of money on paid search even though they have no idea which terms are meeting their marketing goals. Online ads are often an afterthought and pharma websites are still ranked low with online health information seekers.
So where are the innovators and disruptors? Probably stuck in meetings or on the way to yet another ePhrama conference. CEO’s only customers are financial analysts and besides GSK not one company has set forth to say “we need to change the way we do business”. Change will be forced upon them.