Seeking Alpha

Pharma firms raise prices to offset generics

  • In response to dwindling revenues from patent expirations, drug companies are aggressively raising prices on their branded offerings. According to the IMS Institute for Healthcare Informatics, $20B of the pharmaceutical industry's 2013 sales growth was due to price increases. This perfectly offset the $19.3B in revenue declines.
  • Since 2007, the CPI has risen 12% while some drug prices have inflated as much as 400%.
  • Therapies that cost $300K or more are becoming more common in light of the incentives afforded by the Orphan Drug Act.
  • Generics comprise 86% of all prescriptions filled but American spent $263B for medicines in 2012, up 11% from 2007's $236B.
  • Unsurprisingly, industry representatives insist that the proper focus should be on outcomes instead of prices. They also cite the ever-rising cost of R&D.
  • ETFs: SPY, QQQ, SH, DIA, IYH, SSO, SDS, XLV, PSQ, VOO, IVV, SPXU, UPRO, VHT, SPLV, TQQQ, SPXL, QID
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