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Column: Pfizer and Merck are raising drug prices again, showing that their price cuts were just a sham to mollify Trump

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It’s hard to believe that anyone was taken in this summer when a handful of drug companies announced rollbacks of price increases or price freezes on some of their drugs, ostensibly in response to jawboning by President Trump.

The Washington Post, in a piece republished by The Times, declared that Pfizer’s July 10 announcement that it would hold off on already scheduled price hikes was “a successful use of the bully pulpit for Trump and a relatively rapid concession by one of the country’s largest companies.”

Trump himself bought into the narrative, and why not, since it made him look like a hero. “Great news for the American people!” he tweeted after Pfizer’s announcement.

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Making promises to the president is not how you fix a fundamental market problem.

— Walid Gellad, University of Pittsburgh

You can probably tell what’s coming. Pfizer is moving ahead with price increases, as is Merck, one of the other drugmakers that staged a theatrical price rollback. In both cases, they’re exploiting loopholes that were really no secret.

Drug industry critics pointed this out at the time. “Pfizer’s alleged concession to Trump is a sham,” said Peter Maybarduk, director of the Access to Medicines Program at the advocacy group Public Citizen. “Pfizer is only deferring price increases — not canceling them, and certainly not lowering its prices.”

Others observe that comprehensive reform of the nation’s pharmaceutical pricing system is needed, not piecemeal responses to presidential arm-twisting. “Making promises to the president is not how you fix a fundamental market problem,” Walid Gellad, an expert on pharmaceutical policy at the University of Pittsburgh, told me this week.

Let’s examine the loopholes, and how the companies have exploited them.

Pfizer never said it would cut drug prices for Trump. Instead, the company said it would “defer” price increases on 41 drug formulations it had scheduled for July 1 until either Trump’s “blueprint to lower drug prices” went into effect or the end of the year, whichever came sooner.

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The “blueprint” mentioned by Pfizer was a roster of modest administrative nudges Trump announced May 11, which industry experts generally found too limited to produce significant lowering of prices. Because the blueprint hasn’t gone into effect, Jan. 1 is the operative deadline. (Pfizer’s actual implementation date for the increases is Jan. 15.)

Pfizer’s Nov. 16 announcement of the restored price increases makes note of the fact prices on 90% of its medicines “will remain unchanged,” which is a bit like observing after a plane crash that most planes land safely.

Merck, in its July 20 announcement of price cuts, built itself a rather more elaborate loophole. The company said it would not increase the average net price of its entire portfolio of drugs by more than inflation annually. It dressed up the announcement by lowering the price of Zepatier, a hepatitis C treatment, by 60% and of six other drugs by 10%.

This didn’t fool experts. Zepatier was a distant also-ran in the market for hepatitis C cures, hopelessly outdistanced by Gilead Sciences’ Harvoni and Sovaldi. Zepatier sales had fallen so low by the first quarter of this year that Merck listed the drug’s U.S. sales in its quarterly financial report as essentially zero.

As for the other six drugs, they were old formulations that had been competing with lower-priced generics for years, and were bringing chump change to Merck’s coffers anyway. One industry analyst estimated that those drugs accounted for less than 0.1% of Merck’s $40 billion in annual sales even at their old prices. They were sacrificial lambs that already had been sacrificed to the immutable laws of the pharmaceutical marketplace.

Notably missing from Merck’s list of price cuts were its blockbuster drugs Januvia, a diabetes medication, and Keytruda, a cancer drug. Together they accounted for nearly $10 billion in sales in 2017, or about 25% of the company’s total revenue. Merck had raised the price of Januvia by more than 18% from January 2017 to mid-2018.

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Sharp-eyed critics noticed that Merck’s commitment to hold price increases on its entire portfolio to the rate of inflation would allow it to jack up prices on its most profitable formulations and balance them with price cuts on its duds. Sure enough, Merck’s new price increases will apply to Keytruda (up 1.5%) and its popular vaccines Gardasil (for human papillomavirus), MMRII (for measles, mumps and rubella) and Pneumovax (for pneumonia). Those vaccines, which were Merck’s third-, fifth- and ninth-best-selling drugs in 2017, are going up by 6% each, a spokeswoman told me.

The company won’t be breaching its commitment to hold portfolio price increases within inflation, but based on 2017 revenues, the cited increases will fatten Merck’s profits by about $357 million, or 15%.

What these actions by Pfizer and Merck tell us is that the drug industry’s steps to cut prices are as evanescent as, well, a Trump tweet. The rollbacks this summer were “window dressing,” Gellad says, chiefly for public consumption and to mollify a publicity-seeking president.

The main drawback of making policy this way is that it misleads the public into thinking that the drug-pricing crisis is easy to solve — just scream at pharmaceutical experts and they’ll fall over. But the forces driving U.S. prices higher are complicated, especially politically.

“A big, comprehensive long-term plan is like a 1,000-piece puzzle,” Gellad says. “You only have a certain time to complete it, and it’s dictated by the political calendar. So it’s hard to fix things that will take 10 years.” In other words, a few months of “deferred” price increases won’t solve anything.

Keep up to date with Michael Hiltzik. Follow @hiltzikm on Twitter, see his Facebook page, or email michael.hiltzik@latimes.com.

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