September 22, 2016
Valeant avoids double-digit price hikes with 9.9 percent increases
By Ed Silverman
In response to intensifying criticism over drug prices, Allergan chief executive Brent Saunders promised not to raise prices by more than single-digit percentage points. So far, no other head of a large drug maker has spoken publicly about this notion or agreed to do the same thing.
Yet some companies may adopt this approach quietly — and push the envelope in the process.
How so? One way is to raise prices on drugs by 9.9 percent. And this is what Valeant Pharmaceuticals did last week.
The drug maker, which has been widely vilified for buying older medicines and then jacking up the prices to sky-high levels, increased list prices for three eye medicines by exactly 9.9 percent, according to Wells Fargo analyst David Maris.
The "9.9 percent increase versus an even 10 percent seems very odd and may be an attempt to stay under the radar of managed care plans and states looking out for double-digit price increases," Maris wrote in an investor note.
The 10 percent threshold has taken on more than symbolic weight, though.
A bipartisan group of congressional lawmakers last week introduced a bill that would require drug makers to justify their pricing and provide a breakdown of their costs before raising prices on certain products by more than 10 percent. The legislation largely mimics bills that have been introduced in more than a dozen states, although only Vermont has passed such a law.
Comment by Don McCanne
For a pharmaceutical firm infamous for abusive pricing of their products, a 9.9% increase is an obvious attempt to keep under the radar by avoiding a double digit increase, but nobody is fooled by this. Valeant could have had a 9.8% increase, but, no, it had to be 9.9%.
In spite of the extensive adverse publicity, the industry continues to gouge. It's time for our government to represent us by introducing publicly-administered pricing - paying legitimate costs plus fair profits. The industry will not walk if we are giving them a fair deal.