Drug Manufacturers Commit to Price Increase Limits and Transparency

Recent months have seen a continuing trend of commitments by pharmaceutical industry leaders to limit annual price increases and to report on pricing practices.  On September 6, 2016, Allergan CEO Brent Saunders announced, in a blog post highlighting a “social contract” between drug manufacturers and patients, that Allergan would raise prices for its branded products no more than once per year, and by no more than 10%.  Similar statements have since been made by AbbVie, Mallinckrodt, and Novo Nordisk.

More recently, large pharmaceutical manufacturers have been releasing transparency reports providing some detail on pricing information for their products.  In recent months, Merck, Johnson & Johnson, and Eli Lilly have released such reports, which reveal average list price increases ranging from 8.5% (Johnson & Johnson) to 14% (Eli Lilly) in 2016.  Notably, the reports also revealed that prices net of rebates and discounts rose only 2.4% for Eli Lilly in 2016, with a 3.5% increase for Johnson & Johnson and a 5.5% increase for Merck.  This is around, or even below, the 2016 medical inflation rate of 4.1%.  Some manufacturers attribute this disparity at least in part to discounts and rebates to insurers and pharmacy benefit managers.  Manufacturers’ disclosures also revealed that manufacturers continue to spend billions on research and development annually.

On May 9, Sanofi joined the trend, releasing a set of pricing principles.  Sanofi pledged to limit its “total annual” price increases for individual products to the HHS national health expenditures growth projection and stated that it would provide a public rationale where it takes a higher increase on a product.  Like the other companies, Sanofi released 2016 list and net price increases and pledged to do so annually.

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