Pfizer CEO expects Trump to eliminate drug rebates

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(Reuters) – Pfizer Inc (PFE.N) Chief Executive Ian Read said on Tuesday he believes the Trump administration intends to stop the practice of allowing rebates on prescription drug purchases, suggesting that U.S. drug pricing reforms may focus on middlemen rather than drugmakers.

“I believe the administration does want to remove rebates, and they consider it a priority,” he said in an interview, following similar comments made on Pfizer’s conference call to discuss second quarter earnings.

The administration has already proposed a rule that would scale back protections currently in place that allow rebates between drug manufacturers and insurers and pharmacy benefits managers (PBMs). Read said he believes the administration wants to get rid of them entirely.

These rebates are rarely passed along to U.S. patients.

Read said Pfizer had discussed the administration’s plan for rebates “in broad terms” with Health and Human Services Secretary Alex Azar. The CEO said he does not know how quickly changes to rebate policy could be implemented.

U.S. President Donald Trump has made lowering prescription drug costs for U.S. consumers a top priority. His administration has placed blame on “middlemen” such as PBMs – which administer drug benefits for employers and health plans – and health insurers for driving up drug prices by demanding hefty rebates in exchange for broad access to patients.

Read said Pfizer currently receives around 58 percent of its list prices on drugs, suggesting that about 40 percent goes to middlemen. He said ending the rebate system would allow drugmakers to keep price hikes in line with health care inflation.

The largest U.S. drugmaker retreated from planned price hikes on about 40 of its drugs earlier this month, following criticism from President Trump. Read has spoken with Trump and visited the White House since deferring those price increases.

Bowing to intensifying political pressure, several major drugmakers have also announced drug price freezes until the end of the year.

Pfizer shares rose $1.09, or 2.8 percent, to $39.68 in afternoon trading, closing in on near 16-year highs.

Pfizer on Tuesday also reported better-than-expected second quarter profit, but trimmed its full-year revenue forecast due to the strengthening dollar.

FILE PHOTO: The Pfizer logo is seen at their world headquarters in New York April 28, 2014. REUTERS/Andrew Kelly/File Photo

Edward Jones analyst Ashtyn Evans said investors were encouraged by management optimism about new drugs and long-term growth prospects after prior disappointment that Pfizer had not done a big acquisition.

“There’s more optimism around the internal pipeline and their ability to expand margins long term,” she said.

Excluding special items, Pfizer earned 81 cents per share, beating analysts’ average estimate by 7 cents, according to Thomson Reuters I/B/E/S.

Pfizer said it now expects 2018 revenue of between $53 billion and $55 billion, versus its a prior forecast of $53.5 billion to $55.5 billion.

It raised both ends of its 2018 adjusted earnings forecast range by 5 cents and now expects $2.95 to $3.05 per share.

Second quarter results were helped by higher-than-expected sales of rheumatoid arthritis drug Xeljanz at $463 million, and by the staying power of its former top-seller Lipitor.

The off-patent cholesterol drug still generated worldwide sales of $521 million.

Total revenue in the quarter rose 4.4 percent to $13.47 billion, ahead of Wall Street expectations of $13.31 billion.

Reporting by Tamara Mathias and Michael Erman; Editing by Sriraj Kalluvila, Bill Trott and Bill Berkrot

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