Mylan Isn't Alone: 11 Drug Companies With Muscular Pricing Power and Staggering Profit Margins

Mylan Isn't Alone: 11 Drug Companies With Muscular Pricing Power and Staggering Profit Margins August 26, 2016
By Mark Terry, BioSpace.com Breaking News Staff

Canonsburg, Pennsylvania-based Mylan is taking a lot of justifiable heat for jacking up the price of its EpiPen by more than 400 percent. This has probably taken a tiny bit of pressure off Turing Pharmaceuticals, which made the questionable decision to increase the price of its toxoplasmosis drug by 5,000 percent, making its then chief executive Martin Shkreli both famous and notorious worldwide. But those two aren’t the only drug companies who have some products with sky-high prices.

Operating margins are a good indication of how much of a company’s revenue is profit, and drug companies in general have hit 25 percent operating margins in the last year compared to 15.8 percent for companies in the Standard & Poor’s 500 index. Mylan’s is 20 percent. Here’s a look at other companies in the industry with even higher operating margins.

1. Gilead Sciences , headquartered in Forest City, Calif., has a lock on the hepatitis C market, and its sofosbuvir has a price tag of $84,000. Gilead’s profit margin is a whopping 62.7 percent.

2. Biogen , in Cambridge, Mass., is a dominant player in the multiple sclerosis (MS) market. Its top drug, Tecfidera, has a wholesale acquisition cost of about $54,900 per patient per year. The company’s profit margin is 49.3 percent.

3. Thousand Oaks, Calif.-based Amgen has a pretty large portfolio of drugs, and its profit margin is 41.5 percent. When it comes to drug pricing, the focus tends to be on its drug for familial hypercholesterolemia, Repatha, which has a list price of $14,100.

4. Celgene , headquartered in Summit, New Jersey, has a profit margin of 32.3 percent. The company’s cancer drug, Revlimid, goes for about $150,000.

5. Zoetis , headquartered in Florham Park, New Jersey, is the largest producer of drugs and vaccinations for pets and livestock in the world. Its profit margin is 28.1 percent. It’s not really clear, since most, if any, of its drugs are covered by insurers, whether drug prices are a big controversy here.

6. Pfizer , which spun off Zoetis, has a profit margin of 27.8 percent. Bloomberg noted in October 2015 that the company had raised prices on 133 of its drugs in 2015.

7. and 8. Bristol-Myers Squibb , headquartered in New York, has a profit margin of 27.3 percent. The company’s multiple myeloma drug, Empliciti, a joint product with AbbVie , has an annual treatment cost of about $142,000.

9. Johnson & Johnson has an profit margin of 27.2 percent. The company made a cumulative price hike on more than 12 drugs in 2015 ranging from 5 to 28 percent. This is a fairly standard strategy for drug companies with older drugs.

10. Regeneron ’s profit margin is 26.8 percent and Regeneron’s is 25.3 percent. Regeneron’s Praluent, for familial high cholesterol, has a price tag of about $15,000 annually.

11. Rounding out the bottom of this list is Alexion . Alexion has the dubious honor of selling what is dubbed the most expensive drug in the world, Soliris, for a rare blood condition known as paroxysmal nocturnal hemoglobinuria (PNH). It runs for $440,000 a year.

It’s worth noting that many of the most expensive drugs are so-called “orphan drugs,” or drugs for rare diseases. The Orphan Drug Act of 1983 gave companies incentives to develop drugs for these diseases, because otherwise there was relatively little profit motive. Nicholas Bagley, who is writing a series for The Incidental Economist on orphan drugs, wrote yesterday, “For orphan drugs, manufacturers won’t be able to move that many units. But what if they can charge up the wazoo for the units they do sell? Due to a combination of market forces and legal obstacles, payers (public and private) find it nearly impossible to resist paying for efficacious drugs, however much they cost. The inelasticity of the market gives manufacturers extraordinary pricing power during periods of monopoly protection.”

So will things change? Probably no one knows how Donald Trump falls on the topic, but Hillary Clinton has expressed an interest in doing something about drug pricing.

Spencer Perlman, an analyst at Height Securities, told USA Today, “We believe that this effort (efforts against Mylan’s price hikes) likely will follow the same playbook that lawmakers used to shame Gilead, Valeant , and others. Congressional hearings and an press onslaught, but no substantive legislative action.”

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