Drug Companies Say 'Don't Blame Us!' for Rising Prices
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What broad money and market headlines open this episode?
With your money briefing, I'm J.R. Whalen at The Wall Street Journal in New York. Drug prices keep rising and the drug companies are raising them. But they're saying, don't blame us. We're not the bad guy. We'll explain in a moment. First, these money in market stories you should know. A report from the National Association of Home Builders casts a shadow on the U.S. housing market, which is struggling to regain its footing. The report, which cites a survey of 17,000 adults in the fourth quarter of last year, indicates that consumers are finding it more difficult to buy a home. The report says at the end of 2017, 27% of prospective homebuyers felt the process of buying a house would get easier in the next 12 months.
By the end of 2018, that number had dropped to 19%. And over that time period, the share of consumers who say they intended to buy a house in the next year fell from 24% to 13%. And whether buyers are millennials, Generation X, or baby boomers, about 75% in each age group said affordability is an issue, and they can only afford half of the homes available in their markets. And amid the controversy surrounding Virginia Governor Ralph Northam, the Wall Street Journal Management and Careers Bureau takes a look at the importance of executives, not just politicians, examining an archive of their lives in high school yearbooks. A public relations executive tells the Journal, as a best practice, companies should be doing background checks on all senior level and board hires, digging in 25 years or more, both virtually and physically, including, as he put it, quotes, high school and college activities, fraternities, nicknames, everything.
Drug prices keep going up, but the word from pharmaceutical companies is, don't blame us. So who's to blame?
How is the U.S. housing market described as struggling with affordability?
We've got Wall Street Journal Pharmaceuticals reporter Jared Hopkins on the line with us for some answers. So Jared, the drug companies have often said in the past they needed to raise prices for research and development, but now many of them are pointing the finger elsewhere.
They basically have flipped the script, so to speak, and said, They are saying that they don't actually benefit much from the list price increases and that it's their net prices that are suffering and they are blaming pharmacy benefit managers. which, among other things, negotiate drug prices in secret and often determine which drugs might be accessible on formularies for patients.
And the drug companies often offset the price increases with rebates and discounts, but those discounts aren't always getting to the consumer.
Right, so it's unclear as to whether or not discounts are ultimately passed through to consumers. It's something that the pharmacy benefit managers understand, say is up to plans and up to PBM, but they say that it often does happen. The drug makers, the branded drug makers say that the discounts are not passed along to the patients enough and that there are too many incentives in the drug supply chain throwing all this off.
You know, critics of the drug industry, as you point out in your story, don't entirely buy the story from the drug companies that the middleman is to blame here. They say even a small price increase can generate substantial revenues for the companies.
Some companies, such as AbbVie, which makes rheumatoid arthritis treatment Humira, which is the top-selling drug in the world, it can still generate sizable sales and generate enough gains through this net price increase. It raised the price by less than 10% in January, but the company has said that both volume and pricing fueled its earnings in the fourth quarter. But aside from AbbVie, not every company we know necessarily about growing through price and volume. And that's because while companies are disclosing their average net price, it's often across the entirety of the portfolio of the drugs and not on an individual drug basis.
Oh, I see what you're saying. And the Trump administration's tried to get involved here and limit the rebates to middlemen as a way to bring prices to consumers down.
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