Column: Drug giant Pfizer says it will return to ‘business as normal,’ which means price hikes
Business as normal.
With those three words, the chief executive of pharmaceutical giant Pfizer declared this week that his company, and by extension the drug industry, is dropping any pretense of being open to price cuts and will continue gouging sick people as much as they can.
After reporting a 45% increase in quarterly profit — 45%! — Pfizer’s CEO, Ian Read, was asked about possible pushback from the Trump administration if he announced price hikes in January after earlier saying the company would reconsider its strategy of regular increases.
“I expect our approach by the end of year will be, what I would characterize as business as normal,” Read answered during a conference call with analysts.
“We price to the marketplace,” he said. “We price competitively, and we will make those decisions towards the end of the year and early in January.”
In other words, no more Mr. Nice Guy. Pfizer will once again reach as deeply as possible into people’s pockets, regardless of what President Trump might want.
Because let’s face it: For all his talk of drug companies “getting away with murder,” Trump has been all bark and no bite when it comes to sky-high drug prices. And the industry knows it.
Joel Hay, a professor of pharmaceutical economics at USC, said drug companies have made clear that they’ll never voluntarily reduce prices.
Pfizer’s message to the White House, he told me, is that “the industry is going to play hardball right back.”
“Let’s see how much money they pour into congressional elections and other lobbying going forward,” Hay said.
Fat stacks, I’m figuring.
In the 2016 election cycle, the pharmaceutical industry gave more than $64 million to political causes, according to the Center for Responsive Politics. Most of that money went to Republicans.
Drug companies’ political contributions might pale in comparison to the more than $1 billion shelled out by financial and insurance firms in 2016, but it’s nothing to sneeze at.
The industry has spent more than $216 million on lobbying this year. Its main trade group, Pharmaceutical Research and Manufacturers of America, or PhRMA, has led the way with about $22 million in lobbying efforts, followed by Pfizer with $9.4 million — the most of any single drug company.
If they were trying to fend off unwarranted, business-unfriendly regulation, that would be one thing. But these guys are rolling in cash.
Pharmaceutical and biotechnology sales revenue soared to $775 billion from $534 billion between 2006 and 2015, according to the U.S. Government Accountability Office.
The average profit margin for the industry in 2015 was 17%. For the 25 biggest drug companies, the average profit margin was 20%.
And now we have Pfizer, the happy people who bring us Viagra, posting a 45% quarterly profit gain. For all of 2017, the company pocketed $21.3 billion, with a big chunk of that coming in the form of a wet kiss from the Trump tax cuts.
In July, Pfizer wanted everyone (and by “everyone,” I mean Trump) to think it could play well with others. It said it would put off its usual summertime price increases as a goodwill gesture until Trump could implement his “blueprint” on lowering U.S. drug costs.
“Pfizer is rolling back price hikes, so American patients don’t pay more,” Trump crowed on Twitter. “We applaud Pfizer for this decision and hope other companies do the same. Great news for the American people!”
Four months later, Trump’s blueprint is largely wishful thinking and Pfizer, for one, is tired of being a presidential punching bag.
“Look, our pricing — I don’t think our pricing situation has changed,” Chief Executive Read said this week. “… Our pricing philosophy is to price to the value of the product and price inside a competitive marketplace.”
That notion of pricing “to the value of the product” is key here. To a sick person, a drug might have limitless value.
I have Type 1 diabetes. Without insulin, I will die. You could charge me whatever you like. If I have the money, I’ll pay it. What choice do I have?
And there, in a nutshell, is the whole problem. Our pharmaceutical industry is single-mindedly focused on maximizing profits, and patients are left to fend for themselves. All other developed countries put patients first and ensure drug prices remain reasonable.
“Telling companies to voluntarily lower their prices and expecting it to happen on a consistent basis is not a realistic long-term policy proposition,” said Anthony T. LoSasso, a professor of health policy and administration at the University of Illinois at Chicago.
Trump has proposed having Medicare pay for some drugs roughly what people in other countries pay, thus bringing U.S. prices in line with overseas prices without any messy governmental price controls.
USC’s Hay called this “the boldest step taken by any administration for drug cost control ever.” But not everyone shares his enthusiasm.
“It’s not going to happen,” said William Comanor, a professor of health policy and management at UCLA. “Nothing’s going to change.”
Indeed, it’s hard to imagine Congress getting behind any change that would so drastically cut into drug-industry profits (and political generosity).
“There is no chance of meaningful pharma price legislation coming out of Congress based on GOP votes,” said James Robinson, a health economist at UC Berkeley. “It will only happen if Trump supports it, all Dems support it and a few GOP support it. Overall probability of course is small.”
Pfizer is signaling that it knows it doesn’t have to take any of Trump’s guff.
This isn’t even the first time the drug industry has poked Trump in the eye in recent days. Drug companies all but laughed off a proposal from the president that they include prices in their TV ads.
PhRMA, the drug lobby, said the farthest the industry would go is posting list prices on a website. And that’s it.
Business as normal — three words that mean drug companies don’t care what you think of their money-grubbing behavior.
I can think of three other words.
Medicare for all.