Drugmakers Find Competition Doesnt Keep a Lid on Prices
Pfizer Inc. raised the list price of Viagra by 13% in June. Less than a week later, Eli Lilly & Co. pushed up the price of its competing pill Cialis by the same percentage. The two companies, though rivals, followed a common industry practice: raising prices almost in lockstep. For years, Pfizer and Lilly have taken increases on their erectile-dysfunction drugs within weeks of each other—sometimes even on the same day—keeping the list price of each pill within a few dollars.
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The freedom to raise, rather than slash, prices in the face of competition is a big reason why U.S. prescription-drug spending has surged by close to 10% on average annually in recent years to $310 billion in 2015, according to QuintilesIMS Institute for Healthcare Informatics. A common six-pill prescription of Viagra or Cialis lists for around $300 today—more than double the price five years ago, according to wholesale acquisition-cost data supplied by Connecture.
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Tandem drug-price increases for other ailments have prompted lawmakers to call for investigations into potential collusion. This month, Sen. Bernie Sanders (I., Vt) and Rep. Elijah Cummings (D., Md.) wrote the Justice Department and Federal Trade Commission requesting an investigation of whether insulin makers “have colluded or engaged in anticompetitive behavior” in setting prices. “Not only have these pharmaceutical companies raised prices significantly—sometimes by double digits overnight—in many instances the prices have apparently increased in tandem,” the pair wrote. The FTC and Justice Department declined to comment.
Among the insulins singled out in the letter were Lantus from Sanofi SA and Levemir from Novo Nordisk A/S. Until Novo raised Levemir’s price last year, each of the drugs listed for $372.75 a month—about 2½ times their sticker price five years earlier—after a series of lockstep increases, according to Connecture. Lantus’s list price has held steady since November 2014; Levemir now retails for $403.50 a month.
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Criticism of high drug prices appears to be curbing increases for expensive drugs treating certain diseases, including rheumatoid arthritis. But the industry retains strong pricing power in many key areas. When the blood-thinner Eliquis went on sale in 2013, Pfizer and partner Bristol-Myers Squibb Co. priced a day’s supply of the tablet one cent less than rival Xarelto. Since then, the drugs have risen in price five times, by a total 44% each. A month’s treatment of either costs $360.
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