Major pharmaceutical companies this week bristled at thesuggestion of federal controls for drug prices.
A congressional study of price increases for drugs, releasedWednesday, was preceded last week by a "preview" pressconference held by Sen. David Pryor, D-Ark., who sponsoredthe report with Sen. William Cohen, R-Maine.
"The report adds to the mounting evidence that voluntary pricerestraints don't work," Pryor said. "The drug industry's trackrecord just doesn't support their so-called "good-faith'intentions." And if pharmaceutical companies can't regulatethemselves, the government will have to do it for them.
That conclusion flies in the face of the major drug companies'recent assertions that they have, indeed, kept their averageprice increases below the rate of inflation.
Stephen Schondelmeyer, the University of Minnesota professorwho analyzed the data in the report, was cited in Wednesday'sWall Street Journal as saying that the study analyzes data onlyon price increases paid by pharmacies, not prices that hospitalspay for drugs. And it shows that 1992 price increases paid bypharmacies for all prescription medicines rose more than 6percent, twice the inflation rate of about 3 percent.
But critics of the report say that the information it used is"misleading" and its conclusions are "inaccurate."
"Absolutely nothing in Senator Pryor's report indicates that anycompany has broken its pledge (to hold prescription priceincreases to the rate of inflation)," said Gerald Mossinghoff,president of the Pharmaceutical Manufacturers Association(PMA), in a statement Wednesday. "Pryor has ... failed to backup his charges."
Among Mossinghoff's allegations is that "Senator Pryor's focuson prices of individual products rather than actual pricescharged for each firm's complete line is selective manipulationof data and an unfair distortion of what the companiespledged."
The major pharmaceutical companies --The Du Pont MerckPharmaceutical Co., Wyeth-Ayerst Laboratories, Pfizer Inc.,Glaxo Inc., Marion Merrell Dow -- went on record withrebuttals as well. They each reconfirmed their commitment to"provide prescription products to customers that remain in line,overall, with annual inflationary expectations," as MarionMerrell Dow's release put it. The pharmaceutical companiesalso disputed the report's calculations.
That drug-pricing issues should affect biotech stocks is afunction of the fact that "drug stocks and biotech stockscompete in the same market," explained D. Larry Smith, ananalyst at Hambrecht & Quist Inc. "What's good for one is goodfor the other."
But for biotech in particular, the only companies that sharepricing concerns with pharmaceutical companies are the"bigger companies" that have drugs on the market, Smith toldBioWorld. "They trade in tandem with the pharmaceuticals."The smaller biotech companies are mainly concerned withdeveloping their one lead product, and should be less affectedby the pricing issue.
Evan Sturza, publisher of Sturza's Medical Investment letter,sees the issue in a similar vein. Companies such as GenzymeCorp. (NASDAQ:GENZ), Synergen Inc. (NASDAQ:SYGN) andAmgen Inc. (NASDAQ:AMGN) have products for which pricingmay become a real issue -- if it hasn't already. But the pricingissue "shouldn't affect the valuation" of the earlier-stagebiotech companies, Sturza told BioWorld.
But David Stone, an analyst at Cowen & Co., said that the pricingissue is indeed a "source of some of the weakness in the biotechstocks." Stone told BioWorld that he had "expected that drugpricing would be a controversial issue this year. ... It's made theinvestors nervous."
-- Jennifer Van Brunt Senior Editor
(c) 1997 American Health Consultants. All rights reserved.