Prescription Drug Prices: Allergan proposes social contract with patients
Allergan is proposing a social contract with patients to limit prescription drug prices and preserve medical innovation.
The company pledged this week that it would not engage in price gouging and would limit increases to its prescription drugs to no more than one single-digit price hike per year.
“I think the entire biopharmaceutical sector needs to take a step back, look in the mirror and figure out how do we discipline ourselves and self-police ourselves to be able to balance investing in research and development and innovation — and pricing our medicines responsibly,” Allergan CEO Brent Saunders said. “Allergan is going to be a different kind of company, that’s going to put the social contract with patients and physicians in front of all of our business decisions.”
Allergan’s CEO says that by tackling the issue of prescription drug prices head on, biopharmaceutical companies will avoid devastating proposals that could cripple medical innovation.
“My biggest fear, every time there’s another headline or more regulator negativity, is that venture capital needed for innovation could move out of the sector,” Saunders told Reuters, adding the amount of venture capital backing for early stage drugmakers was slowing. “If the bottom of the ecosystem, which is so important for early drug discovery, begins to evaporate, innovation will start to go away. It has started.”
Read Allergan’s Proposal to Limit Price Increases
Below are a few of the highlights of Allergan’s Social Contract, which includes its perspective on high prescription drug prices.
“The health care industry has had a long-standing unwritten social contract with patients, physicians, policy makers and the public at large.”
“It was designed to be a win-win-win. New medicines for patients. Lower overall cost or damage of disease. An appropriate return on capital for those taking risk by investing time and talent in the arduous and uncertain task of developing new treatments.”
- We commit to these responsible pricing ideals for our branded therapeutics.
- We will price our products in a way that is commensurate with, or lower than, the value they create by mitigating or avoiding the need for other treatment modalities or providing better quality of life to those patients without other treatment options.
- We will enhance access to patients. This means that Allergan will enhance our patient assistance programs in 2017 to match the current industry leader(s).
- We will work with policy makers and payers to facilitate better access to our medicines.
- We will not engage in price gouging actions or predatory pricing.
- We will limit price increases. Where we increase price on our branded therapeutic medicines, we will take price increases no more than once per year and, when we do, they will be limited to single-digit percentage increases. Our expectation is that the overall cost of our drugs, net of rebates and discounts, will not increase by more than low-to-mid single digits percentages per year, slightly above the current annual rate of inflation.
- We will not engage in the practice of taking major price increases without corresponding cost increases as our products near patent expiration. While we have participated in this industry practice in the past, we will stop this practice going forward. Where new regulatory requirements impose added costs, we will seek to reflect those costs in our pricing.
- We commit to providing an aggregate view of the net impact of price on our business at least annually.
You can read the entire policy here.
Patient advocates urge more companies to follow Allergan’s lead
Allergan’s announcement is being welcomed by all sides of the health sector.
“At long last, a pharma CEO has stepped up and made the types of commitments needed to help turn the industry’s reputation around,” writes Forbes contributor John LaMattina.
Robert Goldberg, vice president of the Center for Medicine In The Public Interest, says that more pharmaceutical companies should embrace Allergan’s example on prescription drug prices.
“Every biopharmaceutical company should take or make the same pledge. Failing to do so is tantamount to siding with price gouging,” Goldberg writes in a post on LinkedIn. “To limit out of patient of pocket costs Allergan will consider taking the rebates now pocketed by PBMs and insurers and give them directly to patients in the form of increased patient assistance. Other biopharma companies should make the same pledge.”
He adds, “The Allergan social contract includes ensuring that the increased cost of government regulation not be passed on to consumers whenever possible and to limit price increases net of rebates.”
Video: Allergan CEO explains company’s plan to limit drug prices
“We’re making a very bold commitment to say we’re not going to engage in this practice,” Allergan’s CEO said in an interview with CNBC’s “Closing Bell.”
Click the image below to watch the video on CNBC.com.