The birth of a drug is not easy. It is an intense, unpredictable, and enormously stressful endeavor that can destroy the hopes of the world's greatest scientific minds and the patients they seek to serve. First victories in clinical trials can quickly lead to catastrophic failures.
However, that reality, and the uniqueness of the life-changing mission of the pharmaceutical industry, becomes chaotic when it goes against the largely laissez-faire attitude of the US government towards regulating drug prices. The current system gives companies like AbbVie, Pfizer, Biogen, and all the titans in the industry almost the ability to rate their drugs no matter how long ago they were. The industry is taking advantage of increasing prices year after year and 2021 is no different.
Look at AbbVie. The company, which took over the pharmaceutical colleague and botox manufacturer Allergan as part of a mega-deal in 2019, produces the world's best-selling drug Humira, which grossed almost 15 billion US dollars in 2019 in the USA alone. This anti-inflammatory drug treats a number of diseases from psoriasis to arthritis to Crohn's disease. So there is no reason to knock on science. However, Humira was first approved in December 2002. Almost two decades later, AbbVie is still increasing its price, although nothing has changed in the way the drug actually works.
Brad Loncar is a biotech investor with an affinity for the industry and the innovation that drives it. He also criticizes a model that inherently provides incentives for sustained cost increases to protect against the risk of scientific failure. It's a model, as Loncar Fortune said during the AbbVie-Allergan deal, that stimulates financial engineering through the medical magic that is the beating heart of the industry. The last Humira price increase for 2021? 7.4%.
January 1st has the dubious accolade as the date for annual drug price increases. Here's a taste of what the hedge fund known as AbbVie is (via Piper).
Humira + 7.4%
Skyrizi + 7.4%
Rinvoq + 7.4%
Imbruvica + 7.4%
Orilissa + 7.4%
Orihann + 7.4%
Restasis + 5.0%
Linzess + 5.0%
Ubrelvy + 5.0%
– Brad Loncar (@bradloncar) January 3, 2021
This is the part of the story where pharmaceutical executives raise their hands. The industry regularly argues that this is an unfair characterization as list prices do not match what a hospital or insurer pays, or what a patient pays for a drug out of pocket.
The exact amount that is charged depends on your insurance status or the payment programs set up by major pharmaceutical companies. You can also learn new uses for an existing drug. A treatment like Humira, which was introduced to treat one condition, could potentially treat a dozen.
That has a serious financial impact on the average American. Even before this final round of price increases, the U.S. list price of the standard 40 mg Humira injection pen rose from $ 16,636 for a year-long supply in 2006 to $ 58,612 in 2017, according to the University of Minnesota Institute's AARP Public Policy Institute and PRIME.
In addition to Loncar, other long-time investors in the life science community say the model is broken. Biogen is another offender this year with its Tysabri treatment, which is used on patients with multiple sclerosis.
Tysabri was approved in 2004. In the 16th year after approval, what did it do to justify a 5 +% price hike on Jan 1st, 2021? I'm all in favor of adjusting prices for inflation or when big new demands arise from heavy investments in post-market research and development … but really BIIB dollars?
– Bruce Booth (@LifeSciVC) January 4, 2021
While AbbVie and Biogen are being selected for the price increases announced so far, many other companies are following the same pattern. Pfizer, Sanofi and GlaxoSmithKline are planning price increases between 0.5% and 8.6%, including for blockbuster drugs like Pfizer's cancer drug Ibrance and its anti-inflammatory Xeljanz.
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