Johnson & Johnson : Says Discounts Cut the Prices for Its Drugs, Though Revenue Rose
By Jonathan D. Rockoff
Johnson & Johnson said Thursday the average price paid for its medicines in the U.S. fell by 4.6% last year due to the company's discounts, and the company's pharmaceuticals chief expects the pricing pressures on drugmakers will continue this year.
J&J, one of the biggest sellers of prescription drugs in the U.S., said it raised the list prices for its medicines by an average 8.1%, but they wound up as a whole costing far less because the manufacturer handed out $15 billion in discounts and rebates.
"That shows the level of competition that exists in the U.S. market," Joaquin Duato, who heads J&J's pharmaceuticals business, said in an interview.
Overall J&J's U.S. pharmaceutical sales still did well last year, rising 6.7% to $21.5 billion. Mr. Duato said that the increase stemmed from higher volume, not prices.
Several drugmakers provide aggregate pricing data each year partly to blunt public criticism of rising drug prices and shift focus to health-care companies like drug-benefit managers that can profit from the price increases as well as from raising the copays patients pay for medicines.
Merck & Co. said last month that the prices of its drugs and vaccines fell 1.9% in the U.S. last year after discounts and rebates.
Mr. Duato attributed the pricing squeeze to three factors that he expects to keep the drug industry's prices after discounts "flat" this year.
Health plans and drug-benefit managers are "more aggressive" restricting access to expensive drugs, and drug companies are required to provide discounts to growing numbers of patients in Medicaid and hospitals in a drug-discount program known as 340(b), Mr. Duato said.
Lower-priced competition is also starting to have an impact on the pricing of biotechnology drugs, Mr. Duato said, as rivals start launching so-called biosimilar copies.
J&J's aggregate drug pricing last year reflected the impact of such competition for rheumatoid-arthritis treatment Remicade, which has been the company's top-selling product but began facing competition from a copy sold by Pfizer Inc. in late 2016.
Remicade's U.S. sales fell $317 million to $4.5 billion last year.
Remicade competition was a "big factor" in J&J's average net price drop last year "but it wasn't the only factor," Mr. Duato said. The average price for J&J's prescription drugs after discounts was negative in 2017 excluding Remicade, he said.
Some analysts had expected a bigger drop in U.S. Remicade sales than what J&J experienced, but said J&J had managed to hold on to much of its Remicade business in the U.S. by offering deep discounts and other perks to limit switching to the rival drug.
Pfizer has sued J&J alleging it thwarted the "biosimilar" competition through "exclusionary contracts" with health insurers, hospitals and clinics. J&J has said the lawsuit lacks merit.
Write to Jonathan D. Rockoff at [email protected]