Industry professionals have found themselves under intense pressure over the last year to explain and limit their price hikes. Just at the beginning of this year, Mallinckrodt Pharmaceuticals was found accused of hiking the price of baby medication by 85,000%.
The call for transparency has been repeatedly turned downThe group, the Interfaith Center on Corporate Responsibility (ICCR), asked 18 pharmaceuticals companies to detail price increases on their best-selling branded drugs and the reasoning behind them. The group also proposed resolutions to put to a shareholder vote, however, most companies pushed back on the resolutions.
The companies resisted for two reasons: drug pricing is complex and company bosses believe customers would struggle to understand it; secondly, they believe that disclosing the information will put them at a competitive disadvantage.
Donna Meyer, Mercy Investment Services’ director of shareholder advocacy says, “they should be part of the solution, rather than adding to the problem. It’s ridiculous that we have such a complex system for drug pricing that the consumer cannot understand the product and value.”
Even European pharmaceuticals companies turned down the request, for the same reasons. The industry’s pushback comes after two of the world’s biggest drug-makers, released “transparency reports” disclosing price hikes over their entire portfolios, rather than for individual drugs.
Merck, for example, said it had raised list prices 9.6% on average last year and a Merck spokesperson said the company believes "disclosing our price increases at the portfolio level provides the information needed for people to understand our pricing practices. These negotiations drive our competitive marketplace—bringing prices down.”
Some big pharmas are vowing to keep prices downHowever, the ICCR wants to see price changes for individual drugs, not averages. Allergan CEO Brent Saunders last year pledged to limit price hikes at a maximum of 10%, and others, including Novo Nordisk and Takeda Pharmaceuticals, have followed suit.
Now, ICCR plans to attend annual shareholder meetings to express “disappointment that the companies didn’t let investors express themselves.”
Meyer said that the companies face hits to their reputations because of their pricing. This can lead to financial risks, which directly affect investors. “I don’t think it’s something we are going to give up on,” Meyer said.
The biggest consequence of sky-high prices is counterfeit drugsIndividuals around the world struggle to afford medication, which makes the market ripe for fakes, sold at a lower price. The American Pharmaceutical Security Institute (PSI) stated that there had been an over 25% increase in incidents in 2015 compared to the year before. Thomas Kubic, president and CEO of PSI says, “the fact that medicines are profitable, easy to transport, and there is little chance of being detected makes them attractive to counterfeiters.”
The EU Intellectual Property Office estimates that European companies lose €10 billion in revenues annually due to the presence of counterfeit medicines. It is therefore in the pharmaceutical industry’s best interests to not just tackle fakes, but to keep costs affordable.
The current measures taken by the pharmaceutical industry has allowed some level of disclosure to the public. Currently, in most countries, drug companies have to report the payments, including meals and entertainment that they provide to doctors for research, consulting and giving promotional speeches. This would be able to influence how often doctors prescribe certain medications. The companies have also had to disclose more results of their clinical trials. And so perhaps cost and pricing will become the next such area. MIMS
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