Ed Silverman at Pharmalot conducted a very revealing interview with California state senator Ed Hernandez, the Democratic legislator who “shepherded the California pharma pricing bill.”
Ed gamely tries to pin down Senator Hernandez on how exactly the bill will make a positive difference. Senator Hernandez seems unable to articulate any particular mechanism of action. His perspective appears to be: “Well, we did SOMETHING.” They did something because pharma companies have, for the most part, been ignoring the outrage over the high prices of drugs.
According to a 2013 Forbes comparison of profit margins in the five primary industrial sectors, [inlinetweet prefix=”” tweeter=”” suffix=””]pharmaceuticals tied with banks for the highest average profit margin at 19%[/inlinetweet]. This was well ahead of the average profit margin for media stocks, oil & gas companies, and automakers, which produced mid-single-digit profit margins (automakers) to low double-digit profit margins (media).
Now you would think that with a lot of drugs going generic and the increase in biosimilars that prices would be coming down but that would be a mistake. The FDA has already approved cheaper biosimilar versions of three drugs that will cost Americans a combined $21 billion this year. Even though the Food and Drug Administration has already approved copycat versions to be sold at a discount, U.S. sales of three blockbuster drugs keep rising and are on pace to reach a combined $21 billion this year.
J&J’s arthritis treatment Remicade became one of the first biologic drugs to encounter biosimilar competition in the EU when Hospira, now a Pfizer subsidiary, launched its version, called Inflectra. Pfizer managed to sell just $40 million worth of Inflectra in the U.S. in the first half of 2017, even though it’s been available at around a 10% discount to Remicade since last October. Pfizer claims Johnson & Johnson threatened to withhold significant rebates from insurers unless they signed “biosimilar-exclusion” contracts that prevent them from reimbursing healthcare providers for any form of Remicade other than the branded version.
California’s Amgen might have the industry’s most fearsome legal team. Novartis is learning this the hard way as it tries to launch biosimilar versions of Amgen’s best-selling drugs.
International sales of Amgen’s top product, Enbrel, have been slipping, but they’re still going strong in the U.S. even though the FDA approved a biosimilar version from Novartis, called Erelzi, over a year ago.
Patients and insurers eager to switch to Erelzi will have to wait. Earlier this year, the Swiss pharma giant said it won’t be able to begin selling Erelzi until 2018 at the earliest, because of a patent protection challenge.
Why the bill?
[inlinetweet prefix=”” tweeter=”” suffix=””]Only nine percent of U.S. consumers believe pharmaceutical and biotechnology companies put patients over profits, while only[/inlinetweet] 16 percent believe health insurance companies do, according to a Harris Poll study released today. Meanwhile, 36 percent of U.S. adults believe health care providers (such as doctors and nurses) put patients over profits, compared to hospitals (23%).