Celgene pledges to limit price hikes—or does it?

Last October, as pharma companies ranging from Allergan to Sanofi were vowing to control price hikes, Celgene raised the prices of its cancer drugs Revlimid and Pomalyst so much that the cumulative increases on the products for 2017 were nearly double what its peers promised to avoid. Now, Celgene CEO Mark Alles seems to be bowing to the pressure to control prices, pledging that the company won’t increase the price of any product at rates higher that the projected rise in healthcare inflation.

But his pledge has a gaping loophole that raises questions about whether price-hike limits will apply to Revlimid—an $8-billion-a-year blood-cancer treatment that accounted for more than half of the company’s total revenues last year.

Alles said in a statement that the company will only raise the price of any drug in its portfolio once a year, and that any price hike will be “at a level no greater than the Centers for Medicare and Medicaid Services projected increase in National Health Expenditures for the year.” That rate for this year is 5.3%, he added.

But the next sentence could raise some eyebrows among drug-price watchdogs. “Because value is a guiding principle of our pricing decisions, there may be exceptional circumstances in which additional clinical or health economic evidence demonstrates a clear and significant increase in the value of one of our medicines where this standard would not apply.”

Does Revlimid’s standing as Celgene’s biggest blockbuster qualify it for “exceptional circumstances?” Alles didn’t say in his statement, and the company did not immediately respond to FiercePharma’s request for clarification.

Alles’ pledge comes amid close scrutiny from the federal government over pricing practices in Big Pharma. The industry is taking heat from the FDA, Health and Human Services Secretary Alex Azar, and of course, President Donald Trump himself, who claimed back in May that pharma companies were preparing to offer “massive drops” in pricing.

The FDA called out Celgene by name in May when it published a list online of complaints it has received from generic drugmakers seeking samples of branded products so they can develop their low-cost copycats. Celgene topped the list with 31 complaints, including 13 related to Revlimid.

The drug isn’t expected to lose its patent protection until 2027 in the U.S., though the company has had to fend off patent challenges to hold onto that exclusivity. Analysts project sales of the product will soar past $15 billion by 2020, and Celgene continues to test it in new indications and as part of combination therapies.

Revlimid’s potential expansion into new indications and combo cocktails could certainly qualify it for “exceptional circumstances,” depending on Celgene’s definition of that term. And there’s little doubt the company needs that product to continue to boost the top line while it works through some significant challenges.

Celgene’s problems started late last year, when it abandoned an experimental Crohn’s disease drug it had acquired for $710 million and slashed its revenue forecast for 2020 from $20 billion to $19 billion. Then the FDA slapped the company with a “refuse to file” verdict on its multiple sclerosis drug ozanimod, pushing a potential approval to 2019.

Celgene has reshuffled its management team, after saying goodbye to COO Scott Smith and business development chief George Golumbeski. Then, last month, Celgene named a replacement for retiring CFO Peter Kellogg, even though he’s not leaving until next year. David Elkins, a Johnson & Johnson veteran, started at Celgene on July 1 and will take over as CFO next month, with Elkins stepping into the position of chief corporate strategy officer until his retirement.

What role will pricing take in the turnaround strategy? That was a big topic of conversation after Celgene released its first-quarter earnings in April, and Alles could very well find himself fielding more questions about it on July 26, when the company releases its next quarterly report.

https://bit.ly/2tS5m65