The Impact of Pfizer’s Price Increases for Xeljanz on Pharmaceutical Innovation

Since 2014, Pfizer has garnered $5.6 billion from price increases on rheumatoid arthritis drug Xeljanz.

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 Pfizer, the largest multinational pharmaceutical company in the world, with treatments in COVID-19 and influenza, 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.

Pfizer Case Study

• Headquarters: New York, N.Y., United States
• Drug Analyzed: Xeljanz (tofacitinib)
• 2021 Company Revenue: $81.3 billion
• 2021 R&D Spending: $13.8 billion
• Other Key Products: Comirnaty (COVID-19 vaccine, mRNA), Prevnar-20 (flu vaccine), Paxlovid (nirmatrelvir, ritonavir), Ibrance (palbociclib), Eliquis (apixaban).

Pfizer became the largest pharmaceutical company in the world by sales following distribution of the company’s pandemic era medicines, including the world’s first mRNA COVID-19 vaccine (in partnership with BioNTech) and Paxlovid, an antiviral treatment for COVID-19. In addition, Pfizer has a deep history developing other vaccines as well as treatments in the areas of oncology and immunology.

We analyzed the pricing behavior on Xeljanz, a treatment for inflammatory diseases such as rheumatoid arthritis and psoriatic arthritis, and ulcerative colitis. Since its launch in late 2012, Pfizer has raised Xeljanz’s net price from its initial launch price, though the price has plateaued since 2018. Still, the highest price in the last decade, in 2017, was nearly 108 percent higher than its initial price in 2013.

Since then, the drug’s revenue has been driven by both increases in the volume of drug sold and the price increase since its launch. Just over 50 percent of the drug’s revenue growth since 2014 has come from higher prices, totaling $5.6 billion.

If the price of Xeljanz remained flat since 2013, the loss of $5.6 billion in revenue would have resulted in $895 million less in R&D spending. We estimate that, based on the drug development scenarios used in our analysis, Pfizer spends from $4.6 billion (Interquartile range [IQR]: $3.5-$6.0 billion) per new drug developed. Therefore, the impact to new drug development is small, leading to 0.19 fewer drugs developed.

The results are further evidence that profit growth driven by price hikes on older, branded, monopoly drugs like Xeljanz rarely leads to the development of innovative new medicines.