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Drug makers May Lose $390 Billion In ...
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Sandeep Singh Dhillon
Drug makers May Lose $390 Billion In Sales Over 5 Years – Investopedia.com
Pharma Notables

Shares of large drugmakers and biotech companies have surged in recent weeks on optimism that President Donald Trump will scrap his populist rhetoric about curbing escalating drug prices. But the industry nonetheless received a shot of sobering news this week from one of the industry’s most respected forecasters.

Slashed Sales Ahead

EvaluatePharma, a division of health care market intelligence firm Evaluate Group LTD., has cut its global revenue projections for drugmakers by about $390 billion over the period from 2017 to 2022, according to the Financial Times. “The continued political and public scrutiny over the pricing of both the industry’s old and new drugs is not going to go away,” Antonio Iervolino, head of forecasting at Evaluate, told the FT. This is the first time in a decade that London-based Evaluate has cut its drug industry revenue forecast, the FT says.

Price Resistance

Whatever orders or proposals eventually may emanate from the Trump White House, pharmaceutical companies are facing increasing resistance as they attempt to persuade insurers and the U.S. government to pay premium prices for their products, the FT says. As a result, sales of several new heart medicines have been disappointing, the FT indicates. These include Repatha from Amgen Inc, Praluent from Sanofi SA and Entresto from Novartis AG.

According to the FT, these companies include AbbVie Inc. Allergan PLC, Novo Nordisk A/S and Sanofi. Apparently unconcerned about courting favorable public and political opinion is Pfizer Inc, which jacked up the list prices of more than 90 drugs by an average of 20%, the FT adds.

The impact is already clear across the industry. Fed Chair Janet Yellen has noted lower drug prices as a factor in tamer inflation readings. Research firm SSR, for example, says the the list price of branded prescription drugs rose only 6.5 percent in this year’s first quarter, a dramatic slowdown from the 10.9 percent increase during the same period last year. After discounts, net prices actually fell by 1.2 percent, according to SSR as quoted by the FT.

Trump Slams Drug Prices

It’s still unclear whether Trump will retreat from his attack on high drug prices. He once claimed that pharmaceutical companies are “getting away with murder,” as quoted by Bloomberg. Indeed, a statement from the White House indicates that a meeting was held last Friday “as part of the ongoing discussions to reduce the burden of the high cost of drug prescriptions,” per the FT. Trump is expected to issue an executive order on the matter in the near future, according to the FT and various news outlets cited by Bloomberg.

Trump Turns Industry-Friendly

The nature of Trump’s executive order may be more industry-friendly than previously anticipated, Bloomberg reports. “It just sounds more and more likely that the focus is going to be on removing barriers to entry rather than a direct attack on pricing,” as Brian Skorney, an analyst at wealth management and investment banking firm Robert W. Baird & Co. Inc., told Bloomberg.

Instead, Bloomberg cites a Kaiser Health News report that Trump’s “Drug Pricing and Innovation Working Group,” headed by a former pharmaceutical industry lobbyist, is focusing on a number of proposals. They include extending the patent life of drugs in foreign markets, stimulating competition in the U.S. drug market, issuing U.S. government debt to help drug companies pay for expensive treatments, and so-called value-based agreements that link insurance reimbursements to drugs’ actual effectiveness. Other topics of discussion in the Trump White House are, per various news reports reviewed by Bloomberg, promoting cooperative agreements between drug manufacturers and insurance companies, accelerating approval of new treatments, and finding ways to get other countries to pay more for drugs, While the drug industry supports value-based agreements, it also seeks relaxation of federal rules that mandate discounted prices to hospitals that serve low-income patients, Bloomberg adds.

Initially, Democratic Representatives Elijah Cummings of Maryland and Peter Welch of Vermont, members of the House Committee on Oversight and Government Reform, had been encouraged by a meeting with Trump in March to discuss drug prices. But on Wednesday, in a letter to Trump, they expressed dismay over proposals that would work “in favor of the very pharmaceutical lobby that you warned of,” as quoted by Bloomberg.

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