BioSpectrum (Asia) - - Bio Edit - Milind Kokje Chief Edi­tor milind.kokje@mmac­

Pre­vi­ous month’s de­vel­op­ments in the US pharma sec­tor clearly shows that the feud be­tween US Pres­i­dent Don­ald Trump and Pharma giants con­tin­ues. This time it is New York based Pfizer Vs. Trump and the cause is once again the drug prices. Pfizer “mod­i­fied” prices of 10 per cent of its nearly 400 prod­ucts and Trump in his tweet strongly re­acted against it say­ing that Pfizer and oth­ers “should be ashamed” for ris­ing prices for no rea­son. His strong out­rage was ob­vi­ous since in May he had said that ma­jor drug com­pa­nies would vol­un­tar­ily make mas­sive price cuts within weeks. But Pfizer par­tially proved him wrong as it had not only in­creased the prices, but in some cases among those 10 per cent prod­ucts the prices have been re­duced also. Another prob­a­ble rea­son for Pres­i­dent’s ire could be that Pfizer in­creased the prices sec­ond time in the year, the first time be­ing usual an­nual hike in Jan­uary when many other com­pa­nies also hiked the prices. The cur­rent hike is re­ported to be over 9 per cent in most of the cases.

In a sub­se­quent de­vel­op­ment, Pfizer de­clared tem­po­rary truce, not can­celling but de­fer­ring the price hike till the year end. Though Trump claimed it to be a vic­tory of “suc­cess­fully con­vinc­ing the com­pany to roll back the hike”, Pfizer has put a pro­viso that till then the Pres­i­dent should im­ple­ment drug pric­ing blue­print, which he had been talk­ing a lot. Pfizer has con­ve­niently put the ball in the ad­min­is­tra­tion’s court now.

Pfizer is not the only one on the tweet hit list of Trump. He had crit­i­cised some other com­pa­nies also ear­lier for price hikes. Since the be­gin­ning of his pres­i­dency Trump has taken up the is­sue of high drug prices and the feud is con­tin­u­ing. In such a sit­u­a­tion Pfizer’s in­sis­tence on drug pric­ing blue­print as­sumes lot of im­por­tance. The rea­son be­ing there is no reg­u­la­tion in US for drug price fix­ing and it is to­tally at the dis­cre­tion of the com­pa­nies. Thus, such a blue print can prove to be in­dict­ing the ad­min­is­tra­tion’s thought process and pre­cise ex­pec­ta­tions from the in­dus­try. That may prob­a­bly help the in­dus­try too to frame its poli­cies on price hike.

Gen­eral per­cep­tion over the drug price hike is that drug com­pa­nies are tak­ing dis­ad­van­tage of the sit­u­a­tion and ex­ploit­ing the pa­tients. But it is also true that the de­creas­ing rate of re­turn on in­vest­ment year by year is com­pelling the com­pa­nies to in­crease the prices. Ac­cord­ing to Deloitte re­port, 12 pharma giants just got 3.2 per cent re­turn on their R&D cost in 2017 as against 10 per cent in 2010.

The com­pa­nies also have to ne­go­ti­ate a lot over the list prices with phar­ma­cies and health in­sur­ance com­pa­nies. That cre­ates a big gap be­tween the list prices and the ac­tual prices the pa­tients have to pay. The ne­go­ti­at­ing mid­dle­men pocket a part of this gap and par­tially pass it on to pa­tients. Keep­ing this gap in mind the com­pa­nies fix the list prices high keep­ing them a wide scope for ne­go­ti­a­tions.

What­ever may be the rea­sons, gen­uine or other­wise, some in­vestors have ob­jected to it. In­vestor mem­bers of the In­ter­faith Cen­tre on cor­po­rate re­spon­si­bil­ity, in a let­ter to Pfizer have quoted Credit Suisse re­port that price hikes gen­er­ated $8.7 bil­lion in net in­come for top pharma com­pa­nies last year. They claimed that Pfizer and few other com­pa­nies gen­er­ated all of their earn­ings growth on price hikes.

Sens­ing the Trump ad­min­is­tra­tion’s views, some com­pa­nies put re­stric­tions on them­selves. For in­stance some said their rise would not be more than 10 per cent. Sanofi has re­stricted its price hike to the rate of med­i­cal in­fla­tion. Pfizer has not re­port­edly done that. How­ever, its at­tempt in the lat­est skir­mish com­pelling the ad­min­is­tra­tion to take def­i­nite stand and mea­sures may change the course of this two-year old bat­tle be­tween Trump and the Pharma com­pa­nies.

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