How did Prolia/Xgeva get priced?

Discussion in 'Amgen' started by Anonymous, May 13, 2011 at 12:56 PM.

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  1. Anonymous

    Anonymous Guest

    Maybe like this!


    Ending drug companies' addiction to price rises

    Thu, May 12 2011

    By Deena Beasley and Ben Hirschler

    NEW YORK (Reuters) - Drug companies are dosing up on price increases to prop up stagnant sales, but will soon need to break that addiction as more medicines face generic competition.

    Industry executives -- notably on the pharmacy management and specialty drugs side -- told the Reuters Health Summit this week that prices for some drugs have been sharply increased because manufacturers need to make up for a lack of new products and the loss of patent protection on older medicines.

    "Prices were just shoved up every year to make more money and meet earnings, to be blunt," Shire (SHP.L: Quote, Profile, Research, Stock Buzz) Chief Executive Angus Russell said.

    He was referring to so-called mass market drugs used to treat common conditions like high blood pressure, rather than the specialty products for rare genetic diseases that are Shire's hallmark.

    Payments for two-thirds of the 15 best-selling drugs in the United States rose by double-digit percentage rates last year, according to an analysis of medical claims data by Thomson Reuters MarketScan.

    "The industry has been in volume decline for three years -- it's been propped up on price," said Tim van Biesen, head of Bain & Co's healthcare practice. "You have to ask how long that can continue."

    He forecast that worldwide sales for the top 25 pharmaceutical companies will be flat for the next five years.

    "This is the only industry in the world that has never had to go down the experience curve in cost," van Biesen said, pointing out that prices for electronics always drop as new technology comes on the market.

    According to MarketScan, paid claims for Pfizer's (PFE.N: Quote, Profile, Research, Stock Buzz) Lipitor, which will go off patent in November, rose 11.4 percent last year, compared with 5 percent annually in the previous five years. Drugs with price rises in the mid-teens included: cholesterol drug Crestor made by AstraZeneca (AZN.L: Quote, Profile, Research, Stock Buzz); blood-clot preventer Plavix sold by Bristol Myers Squibb (BMY.N: Quote, Profile, Research, Stock Buzz) and Sanofi (SASY.PA: Quote, Profile, Research, Stock Buzz); and asthma treatment Singulair, from Merck & Co. (MRK.N: Quote, Profile, Research, Stock Buzz)

    "As their branded drugs approach the patent cliff, there has always been the tendency to see increased pricing toward the end, just to get the last dollar out of every drug before they lose brand protection," said David Snow, chief executive officer at Medco Health Solutions (MHS.N: Quote, Profile, Research, Stock Buzz), one of the nation's largest managers of prescription drug benefits.

    PREMIUM PRICES

    When it comes to ground-breaking new medicines, premium pricing is still the order of the day. The trouble for companies like Pfizer, Merck and Sanofi is that they are not producing enough breakthrough treatments.

    Swiss drugmaker Novartis (NOVN.VX: Quote, Profile, Research, Stock Buzz) set an average annual U.S. price for Gilenya, the first oral treatment for multiple sclerosis, of $48,000 last October -- a hefty premium to the price charged for older medicines, which must be injected.

    Novartis was able to justify that price, given the new drug's effectiveness and the fact that it frees patients from injections. But the premium pricing has since been followed by steep price rises for some of the older injectable products.

    Drugmakers say the limited lifetime of their brand-name medicines -- they will eventually be supplanted by low-cost generics -- and high development costs mean they need to bring in as much revenue as possible before patents expire.

    Medco's Snow said other costs, including the 10-year $80 billion excise tax that will be assessed on brand pharmaceutical companies under last year's U.S. healthcare reform law, are also taken into account.

    "If you think for a second they are just going to take their bottom line, hand it over in taxes to the government and not consider it a cost of doing business, then people don't understand how business works," he said. "So it does not surprise me we've seen an acceleration in price increases to make up -- to pay for those taxes."

    Drug companies typically offer hefty discounts and rebates to insurers and government payers, making list prices virtually useless as a tool for tracking drug sales.

    "We really don't have good transparency on pricing in the United States market," said AstraZeneca CEO David Brennan, while noting that it is one of the few markets where companies can freely raise prices.

    Bain's van Biesen said pharmaceutical companies -- barring a major innovation leap -- are facing several years of stagnant growth.

    "We have observed some really high price increases being taken by other companies in the U.S. ... which I just find absolutely incredible," GlaxoSmithKline (GSK.L: Quote, Profile, Research, Stock Buzz) CEO Andrew Witty said on a recent conference call.

    "We think it is probably not the right moment for people to be taking crazy price increases. We think ultimately that is going to come back to bite."

    (Reporting by Deena Beasley and Ben Hirschler; Editing by Michele Gershberg and Matthew Lewis)

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  2. Anonymous

    Anonymous Guest

    dmab = ZOMETA X 2.
    Simple pricing strategy.