In the wake of growing public concern over prescription drug pricing, Allergan CEO Brent Saunders announced in a blog post that the company would limit price hikes to once a year and will be no more than a single-digit percentage.

“Lately, there has been a tremendous focus on the cost of medicines and some of it has been very appropriately targeted at those outliers who have taken dramatic price increases—or engaged in what the public thinks of as price gouging, especially on life saving medicines, Saunders began. “I understand the public outcry and add my voice to the condemnation of these behaviors.

Sanders said Allergan will price its products “in a way that is commensurate with, or lower than, the value they create” and will work with policymakers to improve patient access.

Our Take: Not long ago over coffee, we mused with a client about this very scenario: what would happen if their CEO (not Allergan) would simply state for the record, very publicly, that it won’t raise prices more than CPI? “Would never happen,” the client said.

Saunders is going beyond that here. In his post, he talks about the social contract among manufacturers, patients and providers. In this contract, everyone understands the “long and risky work” to develop drugs, but that innovators must price those drugs in a way that people can afford them. 

And he gets specific: “We will not engage in the practice of taking major price increases without corresponding cost increases as our products near patent expiration,” he writes. “While we have participated in this industry practice in the past, we will stop this practice going forward.”

A recent Aspen Ideas Festival panel addressed the drug pricing issue and what to do about it. What comes to mind were comments by Dr. Ken Davis, President and CEO of Mt. Sinai Health System. “What happened to the social contract?” he said. “What happened to the people with core values that say, ‘We develop these drugs in order to have a fair return, a fair profit, and to make sure that we’re helping everyone who needs the drug?’” 

The cynics will say that Saunders is merely attempting to stave off any pending legislation of drug prices with a preemptive, self-regulatory strike. 

We don’t think so. He sounds sincere. But don’t take our word for it, see for yourself.

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