Business Corpus: Pfizer Opts To Defer Price Hikes Amid Trump Scrutiny — So, Who's Next?An agreement by Dow Jones component Pfizer to defer drug price increases in an effort to play nice with President Donald Trump led analysts Wednesday to question what the fallout of the drug giant's action would be for the industry. The post Pfizer Opts To Defer Price Hikes Amid Trump Scrutiny — So, Who's Next? appeared first on Investor's Business Daily.

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An agreement by Dow Jones component Pfizer (PFE) to defer drug price increases in an effort to play nice with President Donald Trump led analysts Wednesday to question what the fallout of the drug giant's action would be for the industry.

Analysts wondered whether other pharmaceutical companies would follow Pfizer's example. Though, notably, Celgene (CELG) is still going ahead with 5% increases for blockbuster cancer drugs Revlimid and Pomalyst, RBC Capital Markets analyst Brian Abrahams said in a report.

"Pfizer's unprecedented reversal of its early July price increases marks tangible administrative influence," Morgan Stanley analyst David Risinger said in his report to clients. He noted Pfizer is awaiting more details from a so-called blueprint to tug down drug prices in the U.S.

Late Tuesday, Pfizer said Chief Executive Ian Read had an extensive discussion with Trump, leading the company to back off price increases on drugs that had been effective July 1. Earlier in the week, Trump attacked Pfizer and others for raising "drug prices for no reason."

"Pfizer shares the president's concern for patients and commitment to providing affordable access to the medicines they need," Read said in a written statement. He also noted Pfizer had committed $5 billion of capital to expand manufacturing in the U.S.

Criticism About 'Sweetheart' Deal

But not everyone jived with Pfizer's and Trump's announcements.

Sen. Ron Wyden, D-Ore., called on Pfizer and the Trump administration to reveal the details of the arrangement that led Pfizer to back off drug prices increases.

"Secret, sweetheart arrangements with Big Pharma companies are exactly why America's drug pricing system is broken," he tweeted. "Trump and his Admin are busy trying to score cheap PR points why Pharma (companies) continue to raise prices by DOUBLE digits."

Pfizer stock dipped 0.6% at the close, to 37.21. Broadly, shares of pharmaceutical companies fell about the same amount on the stock market today.

Will Pharmaceutical Companies Follow?

Trump renewed his pledge in May to lower the cost of prescription medicine in the U.S. At the time, analysts largely said the proposed blueprint appeared to be more rhetoric than reform.

Morgan Stanley's Risinger believes Pfizer's U.S. price increase reversal could have slightly negative implications for the second-quarter earnings season. He notes Pfizer's updated guidance commentary will be key later this month.

"In addition, the news could put a near-term damper on future price increase action by other pharma-bio companies," he said. "But Pfizer indicated that its action is temporary since it only committed to keeping prices unchanged through the end of 2018."

Other pharmaceutical companies could also rethink their 2019 guidance, he said.

"Whether manufacturers limit themselves to one price increase per year or hold off entirely on customary January increases is key swing factor to earnings which we think is underestimated by the market," he said.

Even Celgene's price increases for Revlimid and Pomalyst remain in line with 2018 medical inflation of 5.3%, RBC's Abrahams said. They are also below historical increases. Meanwhile, Gilead Sciences (GILD) joined Pfizer and walked back on planned price increases, he noted.

"We see this more reserved price increase and increased transparency as potentially tempering headline risk and public scrutiny, as has been experienced by Pfizer, and it's in line with our view that companies will self-police in price increases to a much larger degree from now on," he said.

Pfizer Restructuring In 2019

Also Wednesday, Pfizer announced it would split its business into three distinct units in 2019 as it contends with looming losses of exclusivity. Under the restructuring, Pfizer's Innovative Medicines division will include biosimilars, anti-infection drugs and sterile injectables. Its Established Medicines unit will include off-patent branded and generic drugs, Finally, the company's Consumer Healthcare branch will hold all over-the-counter medicines.

Innovative Medicines will run all the current Innovative Health businesses as well as the new Hospital Medicines business unit. Pfizer will also incorporate its biosimilar portfolio into its Oncology, and Inflammation and Immunology units.

Established Medicines will hold the majority of Pfizer's off-patent drugs. This includes Lyrica, cholesterol drug Lipitor, high blood pressure drug Norvasc and erectile dysfunction drug Viagra. The business will run globally.

The unit is meant to operate "as a true stand-alone business within Pfizer," the company said in a news release. It will have its own manufacturing, marketing, regulatory and, with some exceptions, enabling functions.

Consumer Healthcare, on the other hand, differs from Pfizer's two prescription medicine businesses, Pfizer said. The firm confirmed it's still mulling strategic alternatives for this unit. It expects to make a decision before the end of the year.

"Trends in consumerism and an increased focus on staying healthy are causing consumers to seek easily accessible health and wellness solutions," the firm said. "The company believes this business is well positioned to continue its growth."

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The post Pfizer Opts To Defer Price Hikes Amid Trump Scrutiny — So, Who's Next? appeared first on Investor's Business Daily.