Many top drugmakers reaped savings from U.S. tax reform, which lawmakers touted as a boon that would deliver jobs and other benefits. In pharma, tax savings and cash brought home from abroad could have lowered costs for patients—or so one senator’s reasoning goes.
But that’s not happening, according to a new report from Sen. Cory Booker’s staff. Putting a spotlight on how companies spent their savings, the report notes that patients won’t see an immediate break on expenses—but shareholders are reaping gains in the form of buybacks. (And dividends, for that matter.)
Now, Booker says he’s watching. He’ll keep an eye on the companies as they decide how to spend future savings, the report states.
The industry pushed back immediately, saying tax changes have spurred increased investment in the U.S.
Five U.S. drug companies—Pfizer, Merck, AbbVie, Amgen and Celgene—implemented share buybacks totaling $45 billion before or shortly after U.S. lawmakers passed tax reform, Booker’s report says. In a group of those drugmakers and five others based in the States, none reduced prices in response to the law.
“Given the windfall that pharmaceutical companies are anticipating as a result of the Tax Cuts and Jobs Act, there is no excuse but to act to lower the cost of prescription medications,” Booker wrote in an accompanying letter.
But, he continued, “based on this analysis, there is no evidence that this is being done.”
However, some drugmakers announced boosts in R&D, employee pay or bonuses, charitable contributions and new capital projects, the report acknowledged. Those efforts could help patients and workers, the report said. On Tuesday, Amgen announced a new $165 million “next-generation” biomanufacturing plant in Rhode Island.
Booker’s staff researched the top 10 U.S. drug companies by 2016 pharma sales: Pfizer, Merck, Johnson & Johnson, Gilead Sciences, AbbVie, Amgen, Bristol-Myers Squibb, Eli Lilly, Celgene and Mylan. The team reviewed fourth-quarter conference call transcripts and found that many pharma executives discussed pricing generally or acknowledged that patients struggle with costs, but that none discussed plans to lower prices in response to tax reform.
A spokeswoman for industry trade group PhRMA said Booker’s report “buries the lede.”
The companies were “cherry picked for inclusion” in the report—at least partly because of their spending on buybacks—but even those companies “committed at least $23 billion to research and development and capital projects, such as new U.S. manufacturing facilities that will drive domestic economic development and job growth and billions more to unspecified projects.”
“This investment builds on the 376,000 jobs supported directly and indirectly by the biopharmaceutical industry in New Jersey alone,” PhRMA’s statement said. Outside of the companies mentioned in the report, others “have publicly reported doing still more to increase their investments in the United States,” according to the industry group.
An Amgen spokesperson told FiercePharma the company is “committed to working with the Administration, Congress and the entire healthcare community to continue to find ways to promote innovation, and bring medicines to patients that address some of the world’s most serious diseases.”
Looking ahead, the senator’s team said it’ll be “important to monitor” the pharma companies as they “continue to make decisions regarding how to allocate their tax savings.” The drugmakers still expect billions more in “uncommitted savings” from tax reform in future months and years, according to the report, so the senator will be watching to see how companies deploy the savings.
While Sen. Booker argues that drugmakers should’ve lowered prices with their savings, many rung in 2018 with price hikes instead. According to Wells Fargo analyst David Maris, Pfizer started 2018 with 116 price hikes of between 3% and 9.46%, Eli Lilly raised prices on 12 drugs between 1.5% and 9.91% and BMS bumped prices on six drugs between 1.5% and 7.9%, among many others.
AbbVie’s 9.7% price hike on the world’s best-selling drug, Humira, could cost the U.S. healthcare system the most, however. The analyst said that price hike could cost $1.2 billion this year.