Why Pharma May Not Fear the Latest Drug-Price Probe | Bloomberg Gadfly

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The investigation will throw an unwelcome spotlight on these companies’ pricing practices and force the release of a lot of documents they’d rather not make public. But this is a pageant we’ve seen before. As uncomfortable as it will be for the drugmakers, it may not result in much lasting damage. Behind the investigation? The fact that list prices for some MS drugs have more than doubled. One more than two-decade-old medicine from Biogen has seen its price jump by 889 percent since approval, according to one of the letters. Pharmaceutical companies usually respond to this sort of criticism by arguing that the rebates they give to pharmacy benefit managers and insurers make list prices essentially meaningless. But those rebates are negotiated in secret. And price hikes have more than made up for these discounts despite the advancing age of many of these medicines and heightened competition — in come cases, propping up revenue after companies can no longer generate it with volume growth. It’s clear why Congress might have a bone to pick.

The Case
A congressional investigation is taking a look at big price hikes on MS drugs

Lawmakers are seeking a wide variety of information and documents on profitability, those aforementioned rebates, pricing strategy, and sales and distribution practices — and it won’t be pleasant for drugmakers. But beyond the headline hangovers, will it hurt the bottom line? History suggests no.A previous 18-month Congressional investigation into Gilead Science Inc.’s pricing of its life-saving hepatitis C medicines reached the less-than shocking conclusion that the company priced its medicines in order to maximize revenue. It led to negative headlines about Gilead and the release of unflattering internal documents on the sometimes bloodless calculus of pricing drugs. But the company didn’t cut its list price. Only competition has managed to put a real crimp in Gilead’s sales, not government action.This is a different situation, of course. Lawmakers are looking at a bigger set of companies and both pricing of new medicines and increases on old ones. There may be more skeletons in a broader set of closets. But absent real evidence of wrongdoing — remember that it’s perfectly legal for pharmaceutical companies to raise prices ad nauseum in the U.S. — the impact will be limited.

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Why Pharma May Not Fear the Latest Drug-Price Probe – Bloomberg Gadfly.