The Outlook for Brand Drug Pricing Part 1: The Traditional Large-Cap Pharmaco’s


US net pricing gains explain more than 100 percent of US revenue growth for the large-caps as a whole; making net price growth crucial not only to future growth but also to dividends, a signal feature of valuations

Net pricing gains are at risk, particularly from rising co-pays, which manufacturers subsidize with co-pay cards that reduce patients’ out-of-pocket costs at the pharmacy counter. As co-pays rise so do the subsidies offered by manufacturers’ co-pay cards, in a self-reinforcing cycle; however the co-pay subsidies reduce net price

To bring the essential moving parts into view, we provide data on list price growth, rebate / discount growth, and resulting net price growth for each company, and also for each company’s key brands

Of the large-caps, Roche is in the strongest position with regards to US pricing. Roche’s US revenues depend very little on US net pricing gains, and the company arguably could raise its net US prices more rapidly than it is doing

AZN, GSK, LLY, and MRK are in the weakest positions with regards to US pricing. GSK is likely to see further US net price erosion for Advair, which accounts for about 32 percent of GSK’s US Rx revenue. This spills over to AZN, whose Advair competitor Symbicort will likely be caught up in the broader category’s emerging price competition. Of LLY’s key brands only Cialis has remaining US net pricing growth; however Cialis loses patent protection in just 2 years. MRK’s net pricing trend is negative, MRK’s average discounts exceed the peer average, and these discounts are growing more rapidly than the peer average

PFE is a unique middle case – it has a number of brands that offer continued US net pricing gains; however the company is pushing net price growth faster than the peer average, and is more reliant on these net pricing gains than other companies. There are significant risks that PFE’s net pricing gains cannot continue to exceed the peer average pace

For our full research notes, please visit our published research site



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