Pfizer Inc.'s (PFE) drug price increases that defy the oval office are provoking a mixed response.
Shares of the New York City-based pharmaceutical giant have remained largely flat to slightly negative in pre-market, adding further signs of uncertainty to what has been a tumultuous fourth quarter so far amid pressure from both President Trump and HHS Secretary Alex Azar on the pricing issue.
The company's announcement of price increases comes shortly after HHS Secretary Azar discussed problems with transparency and pricing controls in the industry. The company's statement appears to be cognizant of that criticism, positioning the price hike as a way to increase research and development of drugs while increasing rebates to insurance companies and pharmacy benefit managers.
"We believe the best means to address affordability of medicines is to reduce the growing out-of-pocket costs that consumers are facing due to high deductibles and co-insurance and ensure that patients receive the benefit of rebates at the pharmacy counter," CEO Ian Read said in in a statement.
Effective January 15, 2019, the list price of 10% of Pfizer's medicines, 41 products in total, will see price increases. For shareholders, this will bring in what Read has called a return to "business as normal."
"I expect that like most industries, we will look at our pricing situation in January and take decisions based on what the competitive set is and what our value proposition is in the new marketplace," he said on the company's third-quarter earnings call. "We've been working with the President on parts of the blueprint and I expect our approach by the end of year will be, what I would characterize as business as normal."
It is worth noting that Read will be succeeded by current COO Albert Bourla on January 1, 2019 -- shortly before the increase.
The price raises on 41 drugs marches the company towards its "normal" business swiftly before his start. In 2017, Pfizer charted double-digit increases across 91 drugs, according to the Financial Times.
Coming Into the Crosshairs
Such increases have brought the company under the microscope of the Trump administration already. Up to this point, the company has seemed content to kowtow to the White House blueprint of moderating prices.
The reversal of course might just draw an angry, and public, reproach from President Trump, given the public nature of his previous commendation.
Analysts are not optimistic on the prospects of a legislative debate around pricing.
"We think this enflames the debate around drug pricing, especially since it comes less than two weeks following an election that resulted in Democrat control of the House, with many having run on drug price controls/Medicare for All platforms," Wells Fargo analyst David Maris wrote in a research note on the hike. "Pfizer probably had no intent on testing lawmakers' resolve on addressing drug pricing, but it may just have done so."
As a result, he set an underweight rating for the entire large-cap pharmaceutical sector until more certainty on the political implications of pricing becomes apparent and the market determines how much of a price increase is acceptable.
For now, investors will need to watch the Twitter feeds of both the President and many drug-price conscious liberal leaders like Bernie Sanders, as a rare area of political agreement could bring regulatory action and more volatility to the shareholders of pharma stocks.
