Pricing is the foremost issue facing the pharmaceutical industry, and is especially prominent in the US. Pharmaceutical companies are renowned for charging more for their drugs in the US than in other Western nations, sometimes by up to five times.

In a recent outlook statement by Zacks on the pharmaceutical industry, revealing that drug pricing issues will ‘remain a headwind’. The statement describes a downward trend in pharmaceutical and biotechnology stocks beginning in September 2015, with particular reference to firms in the centre of the pricing controversy such as Valeant Pharmaceuticals International (Valeant), who saw their share prices plummet by almost 90%.

The statement also discusses President Donald Trump, who – despite expectations that drug pricing may be downgraded as a policy issue – has made it clear that he intends to reduce drug prices. According to a poll at the beginning of 2017, the affordability of prescription drugs remains a public priority.

Biosimilars – a follow-on version of original biological medicines – can reduce healthcare costs and increase patient access to treatments, and offer a large and lucrative market. Citing research by the IMS Institute for Healthcare Informatics, the statement says increasing acceptance of biosimilars, combined with a pipeline of over 50 new candidate drugs, is expected to generate savings of around US$110 billion for healthcare systems across Europe and the US by 2020.

Biosimilars are also becoming more accepted by prescription formularies. Retail pharmacy CVS Health for example has announced that biosimilars will be an important component of its 2017 formulary strategy and will be used to replace more expensive drugs where possible.

The statement also describes a significant drop in new drug approvals in the US. Twenty-two new drugs were approved by the US Food and Drug Administration in 2016, compared to 45 approvals the previous year, despite no major change in the number of new drug applications. Finally, Zacks lists several company ‘stocks to avoid’, including those of Novo Nordisk, whose shares dropped over 30% in the last year; Gilead Sciences, which is having difficulties with its viral hepatitis medicines franchise; and Valeant, which has been at the centre of the pricing controversy due to a strategy of acquiring companies and then selling their products at higher prices.

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