Health

Max Nisen is a Bloomberg Gadfly columnist covering biotech, pharma and health care. He previously wrote about management and corporate strategy for Quartz and Business Insider.

When you get a bunch of pharma execs together to talk drug pricing, they're supposed to trade banal and mutually beneficial platitudes about unfair press coverage and the need to pay for innovation. 

What they're not supposed to do is get into a shouting match, which is exactly what happened between Regeneron Pharmaceuticals Inc. CEO Leonard Schleifer and Pfizer Inc. CEO Ian Read at Forbes's Health Summit on Thursday. While Read defended the industry's price-hiking practices, Schleifer said he hated them, expressed understanding for pharma's radioactive reputation, and declared Pfizer wasn't "entitled to a fraction of GDP." 

Beyond the moral dimensions of this argument, there are other, less-lofty reasons for Read to defend the status quo and Schleifer to suggest the industry reform itself. A price-hike-free world is fine financially for Schleifer's Regeneron, but potentially scary for Read's Pfizer.

Shrinking Goliath
Pharma giant Pfizer is trying to reverse years of declining sales, while smaller Regeneron has grown at breakneck speed
Source: Bloomberg

Pfizer is a routine list-price hiker, Regeneron is not. While Regeneron's Eyelea is pricey at $1,850 a dose, the company has not increased the price once in its six years on the market. Whether that's due to a moral stance, competition from Roche's Lucentis, or the fact that Roche's older drug Avastin is used off-label at a discount doesn't matter. Regeneron has managed to grow revenue from $400 million to more than $4 billion in five years without a price hike. 

Pfizer, on the other hand, has a long-running tendency to take annual or biannual price increases. The company is particularly aggressive with older drugs such as Viagra. It takes relatively small individual increases, but they add up over time. At one point in 2015, Pfizer had raised prices on 133 of its more than 600 drugs, most of them by 10 percent or more. 

Gone Hiking
Pfizer has hiked prices substantially on a number of drugs since 2012.
Source: Bloomberg Intelligence/Symphony

The vast majority of Pfizer's revenue comes from older products, and a sizable chunk of that has come from price hikes. Health-care consultancy SSR estimates a third of Pfizer's revenue growth from 2012 to 2015 came from higher prices.

Aside from breast-cancer drug Ibrance, which was approved last year, Pfizer doesn't have a particularly robust set of new drugs coming to lessen its dependence on prices. It just gave up on one of its latest-stage and most-promising assets, a cholesterol-lowering drug, because it compared unfavorably to Regeneron and Amgen's similar on-market drugs.

Analysts, on average, expect Pfizer's pipeline drugs will account for $2.9 billion in sales in 2019. Two of Regeneron's upcoming drugs alone will account for $2.4 billion by then, according to analyst estimates -- despite a research budget and market cap that are about one-fifth the size of Pfizer's.  

Small wonder Schleifer's charge that pharma uses "price increases to cover up the gaps in innovation" seemed to hit home with Read.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

To contact the author of this story:
Max Nisen in New York at mnisen@bloomberg.net

To contact the editor responsible for this story:
Mark Gongloff at mgongloff1@bloomberg.net