By: Sarah L. Sandhu , CNNMoney.comA $1.9 billion drug-related deal between Pfizer and CVS Health could boost drug prices by more than half by making sure drugmakers get their way when negotiating prices, according to an analysis by the Institute for Policy Studies (IPS).
The deal, announced Wednesday, could significantly boost the cost of the drugs currently on the market, but the study warns that it’s not a panacea.
The IPS report is titled “How Pfizer’s drug-price deal with CVS could boost prices by about half.”
Pfizer’s deal with the U.S. Department of Justice (DOJ) and Cuts and Cures Health Care will bring a new era of drug pricing.
In a bid to make drug prices more competitive, the DOJ and CUT and CURES plans have agreed to negotiate the price of the first phase of Pfizer Medscape, a $4.9-billion generic drug that’s already been approved for use in more than 100 countries.
The new deal will provide Pfizer with the ability to charge an additional 3.5% for the first two years of sales, and it’s also expected to allow Pfizer to negotiate prices for a variety of drugs.
The price will remain constant after two years, but it will drop as the second year approaches.
The deal is expected to save Pfizer about $1,500 per patient over two years and bring in $8 billion in revenue, according a spokesperson for Pfizer.CVS Health, the nation’s second-largest drugstore chain, will be allowed to negotiate for up to five years a price with Pfizer, and the deal is also expected that the pharmacy chain will be able to negotiate with other drugmakers.
“Pfizers decision to partner with Cuts &Cures to bring new life into the lifesaving life-saving Medscape drug could have a major impact on prices,” the IPS report states.
The group has previously warned that drugmakers are trying to lock in low prices on the drug for the benefit of their competitors.
The deal is one of a number of high-profile drug deals between Pfizers and C&S, including $3.9 million for a new drug to treat cancer, $8.5 million to fight the Ebola virus, and $2.7 billion to treat Alzheimer’s disease.
Pfizs decision to join CVS is a positive sign for the U of T, the Institute of Medicine, and other academic researchers, the IPS reported.
“It is encouraging to see Pfizer agreeing to a multi-year agreement with C&s, an investment that is a significant step forward in addressing the serious problems with generic drug pricing and the ongoing over-prescription of expensive new drugs,” Daniel S. Schoenfeld, professor of public health economics at the Icahn School of Medicine at Mount Sinai, wrote in an email.
Pfizer has long been one of the largest drug makers in the world, but recently started to reduce its reliance on generic drugs.