Valeant Pharmaceuticals repeated a pledge to back off its practice of
hiking the price of off-patent drugs, a week before congressional hearings on the issue begin.
In an op-ed on CNBC.com Wednesday, interim CEO Howard Schiller and interim chairman Robert Ingram said they’d start cutting prices on some drugs.
Valeant’s been under fire for nearly a year for relying on price increases to drive sales growth. In the past it has acquired drugs and immediately hiked their prices, even though the products were off patent and required little or no additional investment by the company.
In September, Democratic presidential candidate Hillary Clinton tweeted her disdain for price gouging, and U.S. congressional leaders vowed to investigate Valeant and other companies with the same business model.
Schiller and Ingram wrote that they would be cutting some drug prices by as much as 95%, aligning much more with generic drug prices. They also pledged to cut back on their dermatology and ophthalmology prices in 2016. Here’s their exact quote:
“In addition to cutting the prices of our branded dermatological and ophthalmological prescription medicines by an average of 10 per cent within the next six to nine months, we’re going to begin offering many of our other branded drugs at generic prices. That will lower prices for those drugs by an average of 50 per cent, and in some cases as much as 95 per cent.”
This isn’t the first time Valeant has said it would do this. When the company originally announced a new partnership with Walgreens in December, it said it would cut prices on more than 30 branded products by between 5% and 95%.
Valeant also plans on giving discounts to hospitals that buy in bulk a discount up to 30% for its heart medications Nitropress and Isuprel. The discount does not bring the price anywhere near where they were before being acquired by Valeant.
The move is similar to a plan by Turing Pharmaceuticals, which said it would discount the price of Daraprim — a drug whose price it raised by 5,000% — by as much as 50% for hospitals administering the drug. These changes do not officially change the list prices of the drugs.
The promises from Valeant come just as the conversation around drug pricing starts to heat back up. A House of Representatives committee will hold hearing next Tuesday, which Schiller is expected to attend, and a Senate investigation also underway.
It’s not yet clear just how much of an impact this move will have on Valeant’s profitability. Schiller and Ingram didn’t provide details on the number of products that would see prices cut in the letter, though a spokesman clarified that the price cuts applied to the more than 30 branded products that were part of the Walgreens partnership.
Valeant sells hundreds products and has boosted prices on some of them by as much as 500% in the past, so even a cut back in a few prices might not be noticeable.
Still, in December the company warned that its fourth-quarter profits would be much lower than initially expected – in part because it canceled price increases it had planned for the fourth quarter. The company is expected to report its earnings next month, though it hasn’t officially announced a date.
In a recent letter, one of Valeant’s shareholders, Viking Global Equities, said that according to its analysis, less than a third of Valeant’s revenue growth came from “aggressive price increases on drugs.” A spokesman for Valeant said this was par for the course, and that in the future the company will gravitate closer to industry standards.
But others in the drug industry disagree that this kind of revenue growth is typical.
“Growth usually comes out of the core pipeline,” said James Bannon, a biotech analyst with ARK Invest. He pointed to Biogen, a company that started out with a multiple sclerosis drug. From there, the company was able to build out a pipeline for new drugs.
Michael Rea, the CEO of RxSavings Solutions, which works to help consumers and employers paying for healthcare understand their drug prices, told Business Insider that he also would expect revenue growth to come out of new therapies.
“[Most companies] don’t just rely on increasing prices,” he said. “When inflation is up 1-2%, 30% just doesn’t work at some point.”
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