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Pharma CEO: A few ‘bad actors’ are raising drug prices for no reason

Erin Fuchs
Deputy Managing Editor

At an EY forum live streamed by Yahoo Finance on Friday, the CEO of biotech company Regeneron Pharmaceuticals (REGN) acknowledged that “really bad actors” have posed a problem for the drug industry.

“We have a few bad actors that have raised prices for no reason, just because they could, not because they innovated anything,” Regeneron CEO Len Schleifer said at the EY panel. “We have to weed those people out without destroying the industry, which I think has to succeed or the health of the nation and the world will suffer.”

Schleifer was responding to a question from the moderator, Harvard Business Review Group Editor-in-Chief Adi Ignatius, about how Schleifer succeeds in a challenging industry that’s facing increasing pressure to bring prices down.

In asking his question, Ignatius alluded to the public castigation of the drugmaker Mylan (MYL) after it raised the price of the life-saving EpiPen from $100 in 2007 to over $600 this year. The Mylan uproar came a year after pharmaceutical CEO Martin Shkreli became the poster child for corporate greed when his Turing Pharmaceuticals hiked the price of a life-saving drug called Daraprim from $13.50 to $750. That scandal helped shed light on other unnecessarily high drug-price hikes across the industry.

Martin Shrkeli, AP Photo/Susan Walsh

Schleifer — whose company has produced treatments for a range of diseases including asthma and rheumatoid arthritis — said the drug makers that are gouging consumers inevitably drum up more publicity than the ones that are doing the right thing. However, drug makers have to balance the needs of consumers with other interests, Schleifer noted.

“We have to set up a bargain where people feel they’re getting a fair price for a drug today. At the same time, other people — shareholder, investors — are willing to put several billion dollars down a blind path which frequently needs nowhere,” Schleifer said. 

Those comments illuminate how tough it can be for drug makers to satisfy shareholders in an often-vilified industry. When addressing Schleifer on Friday, the Harvard Business Review’s Adi Ignatius pointed to another sign of challenging times in big pharma. This year, HBR named Lars Sorensen, CEO of the Danish drug maker Novo Nordisk, as No. 1 on its list of best-performing CEOs, and before the list went to press he ended up stepping down from that role.

In a Sept. 1 article about Sorensen’s resignation, Reuters noted that the drug maker’s prices had been squeezed by pharmacy benefit managers (PBMS). PBMs process deals between pharmacies and insurers or employers, and they often negotiate for drug discounts.

Ultimately, PBMs can affect drug makers’ bottom lines and provide an incentive for them to hike their prices. As Ignatius told Schleifer on Thursday, “You’re in a tough industry.”