[Ip-health] Stat: Valeant Avoids Double-Digit Price Hikes With 9.9 Percent Increases

Andrew S. Goldman andrew.goldman at keionline.org
Thu Sep 22 13:08:48 PDT 2016


By ED SILVERMAN @Pharmalot

SEPTEMBER 22, 2016

In response to intensifying criticism over drug prices, Allergan chief
executive Brent Saunders promised not to raise prices by more than
single-digit percentage points. So far, no other head of a large drug maker
has spoken publicly about this notion or agreed to do the same thing.

Yet some companies may adopt this approach quietly — and push the envelope
in the process.

How so? One way is to raise prices on drugs by 9.9 percent. And this is
what Valeant Pharmaceuticals did last week.

The drug maker, which has been widely vilified for buying older medicines
and then jacking up the prices to sky-high levels, increased list prices
for three eye medicines by exactly 9.9 percent, according to Wells Fargo
analyst David Maris.

Of course, such a price hike pales in comparison to the 525 percent and 212
percent increases Valeant took on a pair of lifesaving heart drugs on the
same day the company acquired the medicines in early 2015. But given the
public anger over rising costs for prescription drugs, this kind of
maneuver is a convenient way to avoid unpleasant scrutiny and still goose

Allergan CEO promises to limit price hikes on drugs in a bid to rebuild the
‘social contract’

The “9.9 percent increase versus an even 10 percent seems very odd and may
be an attempt to stay under the radar of managed care plans and states
looking out for double-digit price increases,” Maris wrote in an investor

He noted the three eye drugs represented just $1.2 million in combined
sales in the second quarter, which is a small piece of $2.4 billion in
company-wide sales. But the company is under pressure to jump-start
revenue, suggesting more 9.9 price hikes can be expected. “While
insignificant,” Maris opined, “we believe this may be a sign of things to

We asked the company why it chose to raise prices by 9.9 percent and not 10
percent, but did not receive a reply.

The 10 percent threshold has taken on more than symbolic weight, though.

A bipartisan group of congressional lawmakers last week introduced a bill
that would require drug makers to justify their pricing and provide a
breakdown of their costs before raising prices on certain products by more
than 10 percent. The legislation largely mimics bills that have been
introduced in more than a dozen states, although only Vermont has passed
such a law.

To some, such legislation may, in fact, actually be interpreted as an
invitation to raise prices, but keep them below the 10 percent cutoff in
order to avoid government red tape. Whether this becomes a regular practice
remains to be seen.

The price hikes come as Joe Papa, the new Valeant chief executive, attempts
tooverhaul the company following pricing and accounting scandals. In the
aftermath, Papa committed to end the reliance on huge price increases.

Valeant also vowed last April to provide discounts to hospitals for the
heart drugs, although those discounts have not yet materialized, according
to a recent survey of nearly two dozen hospital systems and medical centers
surveyed by Bloomberg News.

Andrew S. Goldman
Counsel, Policy and Legal Affairs
Knowledge Ecology International
andrew.goldman at keionline.org // www.twitter.com/ASG_KEI
tel.: +1.202.332.2670

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