The Impact of Bristol Myers Squibb’s Price Increases for Orencia on Pharmaceutical Innovation
Net prices for arthritis drug Orencia increased more than 113% from 2011 to 2020.
The pharmaceutical industry has long argued that high drug prices are a good thing because the profits from these price hikes allow companies to spend more on research and development to discover and launch the cures of the future.
To test the claim that higher drug prices drive innovation, we gathered data from the industry, individual companies, and the FDA to conduct a counterfactual analysis: what would happen at some of the largest pharmaceutical companies in the world if prices on certain blockbuster drugs had remained constant over the last 10 years?
The following case study examines drug pricing at Bristol Myers Squibb, a multinational pharmaceutical firm with treatments in oncology, immunology, and cardiology. This analysis is part of a larger study on the impact of pharmaceutical price increases on medical innovation. To read the full study, click here.
Bristol Myers Squibb Case Study
- Headquarters: New York, N.Y., United States
- Drug Analyzed: Orencia (abatacept)
- 2021 Company Revenue: $46.4 billion
- 2021 R&D Spending: $11.4 billion
- Other Key Products: Revlimid (lenalidomide), Eliquis (apixaban), Opdivo (nivolumab), Pomalyst (pomalidomide), Sprycel (dasatinib)
Bristol Myers Squibb relies heavily on a handful of products for most of its revenue, led by Revlimid (27.6 percent of 2021 revenue), Eliquis (23.2 percent), and Opdivo (16.2 percent). Revlimid’s revenues are particularly noteworthy given the drug has been on the market for only five years.
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We analyzed Bristol Myers Squibb’s pricing behavior for Orencia since 2011. We found the net price of the drug increased more than 113 percent from its 2011 price to its peak in 2020. Most of this increase occurred from 2014–2016.
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Orencia’s revenue is overwhelmingly driven by price increases over the last decade. Nearly 69 percent of the drug’s revenue growth came from price increases, totaling $6.8 billion over 10 years.
If the price of Orencia remained flat since 2011, the loss of $6.8 billion in revenue would have resulted in $1.8 billion less in R&D spending. We estimate that, based on the drug development scenarios used in our analysis, Bristol Myers Squibb spends $6.4 billion (IQR: $5.7-$7.2 billion) in R&D per new drug developed. Therefore, the loss of revenue from, Orencia would lead to 0.28 fewer drugs developed.
The results are further evidence that profit growth driven by price hikes on older, branded, monopoly drugs like Orencia rarely leads to the development of innovative new medicines.
The Impact of Bristol Myers Squibb’s Price Increases for Orencia on Pharmaceutical Innovation was originally published in FREOPP.org on Medium, where people are continuing the conversation by highlighting and responding to this story.