(Bloomberg) — A single, 5,000 percent price hike on an anti-parasitic drug made by Turing Pharmaceuticals garnered national media attention. But it’s just one of hundreds of smaller price increases drug companies make in the U.S. each year, a tactic the industry uses to generate more revenue from older medications.
Pfizer Inc. (NYSE:PFE), the nation’s biggest drugmaker, has raised prices on 133 of its brand-name products in the U.S. this year, according to research from UBS, more than three-quarters of which added up to hikes of 10 percent or more. It’s not alone. Rival Merck & Co. (NYSE:MRK) raised the price of 38 drugs, about a quarter of which resulted in increases of 10 percent or more. Pfizer sells more than 600 drugs globally while Merck has more than 200 worldwide, including almost 100 in the United States.
Drugmakers have long said these increases aren’t felt by most consumers because intermediaries like insurers negotiate what is ultimately paid — meaning what they really charge for their drugs is far below the list price. Pfizer and its rivals say they can’t make those negotiated prices public for competitive reasons.
Like its competitors, Pfizer has been raising prices on older drugs in its portfolio for years. The increases in the U.S. have added $1.07 billion of quarterly revenue from mid-2012 to the middle of this year, helping limit the company’s total decline in quarterly revenue over that time period to $2 billion even as patents on blockbuster drugs expired, according to estimates from SSR, an investment research firm. In the case of Bristol-Myers Squibb Co. (NYSE:BMY), increasing the price of existing drugs in the United States brought in $435 million of revenue over the past three years, leaving the contraction of the company’s global sales at $280 million, SSR estimates show.
‘Variety of factors’
Pfizer said it offers programs to help patients who can’t afford its drugs. The company said it advocates that the prices patients pay be “as low as possible.”
“There are a variety of factors that determine the timing and amount of a price change for a Pfizer product,” Pfizer spokesman MacKay Jimeson said. “In some cases a price change may be due to competitor pricing, an increase in global demand as a result of a competitor exiting the market, or shifting disease patterns in a particular country or region.”
Bristol-Myers spokesman Ken Dominski said the company can’t confirm SSR’s numbers and that its complete financial information, including the impact of prices on sales, is disclosed in regulatory filings.
Bristol-Myers takes into account a number of things when considering the prices of drugs, “including the value they deliver to patients and society, the scientific innovation they represent and the investment required to research new uses for these and other compounds in our pipeline,” Dominski said. The company increased prices on about six of its drugs this year, according to the UBS data.
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Merck declined to comment.