French drugmaker Sanofi (SASY.PA) has pledged to peg U.S. drug price rises to below healthcare inflation in a move that limits increases for any product this year to 5.4 percent, unless there are exceptional circumstances.
The price promise goes one step beyond action taken by a number of other large pharmaceutical companies that have undertaken to keep 2017 price increases below 10 percent.
Drugmakers are under fire worldwide over prices as a wave of new treatments for cancer and other serious conditions reach the market, some costing tens or hundreds of thousands of dollars per patient.
The row is particularly fierce in the United States, where prices are higher than in Europe and where there have been highly publicised increases in some older products, such as Mylan's (MYL.O) EpiPen for allergic reactions.
The complex U.S. supply chain has led to a blame game between drugmakers, health insurers and intermediaries known as pharmacy benefit managers.
"This complexity is undermining the reputation of an entire industry whose purpose is to make a positive change in patients’ lives," Sanofi Chief Executive Olivier Brandicourt said.
Sanofi will take as its pricing benchmark the national health expenditures (NHE) growth projection, which is calculated by the Department of Health and Human Services and covers spending by all U.S. payers, including individuals.
"By limiting our price increases to the NHE growth projection, we ensure that Sanofi is not contributing to further medical inflation," Brandicourt said.
This would cap price increases for any product to 5.4 percent in 2017, but Sanofi said there might be times when there was a "sound reason" for a higher increase, in which case it promised to demonstrate publicly the rationale for such a rise.
Sanofi said it would disclose the gross and net prices for its medicines in future, adding that in 2016 its average aggregate list prices increased by 4.0 percent but net prices fell by 2.1 percent.
Other companies, including Merck & Co (MRK.N) and Johnson & Johnson (JNJ.N), have also released gross and net prices. But the picture is particularly stark for Sanofi, which is being hit hard by competition in its core diabetes treatment business.
The competition is driving down its prices, notably for its long-lasting insulin Lantus.
Responding to criticism about high drug prices, other firms such as AbbVie (ABBV.N), Allergan (AGN.N), Novo Nordisk (NOVOb.CO) and Takeda Pharmaceutical (4502.T) have promised to keep all drug price increases in 2017 in single digits.
Sanofi believes pegging prices to an independent measure like the NHE is more objective and less arbitrary than such a single-digit promise.
The NHE is currently projected to increase by an average 5.6 percent annually between now and 2025. NHE inflation has generally hovered around the mid-single digits level, with the increase hitting a historic low of 2.9 percent in 2013.
In the past, Sanofi has received mixed reviews for its drug pricing.
The company surprised many investors in March when it set a lower-than-expected price for its new injectable eczema drug Dupixent, developed with long-time partner Regeneron Pharmaceuticals (REGN.O).
But it has been accused by a group of patients of colluding with rivals over diabetes drug prices going back several years. Sanofi denies the charge.
(Editing by Mark Potter and Edmund Blair)