And Now Some Humble π … Brand Drug Pricing Runs the Traditional Election-Year Red Light

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We had generally expected brand drug pricing to decelerate into 2012, but the January price trend is fairly convincing evidence that we simply got this wrong – real pricing gains for brand drugs are continuing apace

As we’ve shown previously, brand drug pricing tends to decelerate into the primary seasons (i.e. now) of general election years, particularly when prices grew in real terms in the pre-election year (as they plainly did in ’11, Exhibit 1). What’s different this time is the extent to which the brand drug subsector depends on real pricing for revenue growth (Exhibit 2). Not only are pricing actions a whole number multiple of US revenue growth, the companies also are under rising sales pressure as EU conditions weaken. This level of need presumably explains the industry’s continued real price growth into the election season

Just over a third of the industry’s annual pricing action tends to fall in January. And, whether other companies’ January pricing actions accelerate or decelerate v. prior years is an important signal that, we believe, tends to influence the pricing pace of companies that price later in January, or even later in the year. For both these reasons the January trend is very much indicative of the probable full year trend; and, since January ’12 is very much on pace with January ’11 (Exhibit 3) , the evidence argues strongly for 2012 annual real price gains on par with those in recent years

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