Bagsværd, Denmark – Rising drug prices have been quite a hot topic this year. From political figures wagging fingers at pharma execs for double- and triple-digit price hikes to outraged patients shouldering more of the cost of medicines in high deductible plans, there have been no shortages of news stories and sound bites on the topic. Last week, Danish pharmaceutical giant Novo Nordisk added its voice to the debate, but this time the news is music to patients’ ears.

Jacob Riis, Novo’s president, announced that moving forward, the company will limit price increases to single-digit increments annually. This stands in stark contrast to the 260% price hike that their mealtime insulin Novolog saw over the past decade. “We recognize that people with diabetes are finding it harder to pay for their healthcare, including the medicines we make. As a company focused on improving the lives of people with diabetes, this is not acceptable.” Reining in these hikes should help make pricing more predictable for Pharmacy Benefit Managers (PBMs), payers, and patients alike.

Allergan Set the Stage for Reining in Prices

While this is a bold move for Novo Nordisk, the company isn’t the first pharmaceutical manufacturer to commit to curbing prices. In September of this year, Allergan CEO Brent Saunders announced a new “social contract with patients” that includes plans to limit annual price increases to low-to-mid single digit growth. He even went a step further to claim that Allergan will “not engage in the practice of taking major price increases without corresponding cost increases as our products near patent expiration. While we have participated in this industry practice in the past, we will stop this practice going forward.”

Manufacturers Aren’t the Only Ones Responsible for Rising Drug Costs…

While the rising costs of medicines are a real issue, pharmaceutical manufacturers aren’t solely to blame. Multiple factors in the healthcare system, especially in the U.S., influence soaring prices. The increasing costs felt by patients also stem from two other sources: growing rebates that manufacturers must pay to PBMs and payers and the growing prevalence of high-deductible health insurance plans. While the former can directly impact the prices manufacturers set for their products, the latter allow patients to feel as though their medications are more and more expensive even if the actual price never budges. Pfizer CEO Ian Read noted recently that when drug prices are held as a percentage of overall healthcare spend, they actually haven’t risen in two decades.

In light of the complexity of the issue, it is clear that no one party is solely to blame for out-of-control healthcare costs. Fortunately for patients, though, some companies are taking bold stances to help quell the chaos. Novo Nordisk has quickly responded to Allergan’s September plea for others in the industry to follow their lead and join together to help fix pricing issues for patients and the overall system alike.

Why This Matters –

If this movement builds steam and more pharmaceutical manufacturers join Allergan and Novo in their commitments, the short-term profitability of pharmaceutical companies will likely be affected as prices level off. Ultimately, the hope is that other entities in the healthcare landscape will follow suit and the extraneous costs will be trimmed to produce a leaner and more powerful healthcare system. If belts tighten in the near future, the most successful companies will have to learn to do more with less—that means more efficient sales and smarter marketing.

About the Author:

Drew Beck brings more than a decade of broad healthcare experience to GSW in his role as the Director of Innovation. He has enjoyed working for big healthcare names including Eli Lilly & Co. and GlaxoSmithKline in Global Marketing and Pharmaceutical Sales roles, but his start came from hands-on work in patient care in Emergency Medicine. This foundation has given him a deep understanding of both patients and healthcare professionals. In his current role, he combines all he has learned from this background with insights into current market trends to help clients drive the future of their brands.