Life Science Compliance Update

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March 03, 2017

Johnson & Johnson Announces Plans to Disclose Average Price Increases

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As America continues to discuss the increase in the cost of prescription drugs, Johnson & Johnson (J&J) has announced that it plans to disclose average price increases of its prescription drugs.

High and rising prices have also infuriated doctors, insurance companies and politicians, and triggered government probes into the industry's practices. The government has no power now to regulate prices, but the industry appears to be starting to move to deflect further scrutiny and avoid price controls.

With annual price tags topping $100,000 for many new drugs for cancer and rare diseases, some patients have been unable to afford their medicines. Huge price hikes on old products with little competition, like Mylan's EpiPen emergency allergy injectors, also have left some patients scrambling.

"We hope that can create a better understanding of the industry and ... ultimately improve patient access to medicines," Joaquin Duato, head of J&J's prescription drug business, said in an interview Tuesday.

Experts say the company's move will help its image more than patients initially, but it could push other drug makers to tame future price increases and be more transparent. The company says it will divulge average list price increases and what middlemen pay for medicines.

Expected to start in February 2017, J&J will issue annual reports listing the average list and net price increases — but not the figures for individual drugs, as the discounts it gives middlemen are competitive information.

Erik Gordon, a professor and pharmaceuticals analyst at University of Michigan's Ross School of Business, called it "opaqueness masquerading as transparency. "They let you look not so bad by camouflaging your big price increases for drugs where you face little competition behind the small increases for drugs where you face strong competition," he said.

Many drug companies and their industry trade groups have been trying to shift public debate away from high prices to the value medicines provide. J&J's move could change that focus. Besides J&J being the world's biggest health care products maker, Duato on Monday became chairman of the Pharmaceutical Research and Manufacturers of America, a lobbying group.

Releasing the averages is "a start" and drug makers should realize "it would be foolish" not to follow J&J's lead, said analyst Steve Brozak, owner of WBB Securities.

J&J will also disclose what it spends on patient assistance, marketing versus research, and payments to physician consultants.

Duato said he doesn't see any impact on revenue and income because J&J has limited list price increases to below 10 percent for several years. About 70 percent of recent revenue growth came from selling more medicines, including a dozen approved since 2011, he said.

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