Allergan CEO: No More Predatory Drug Pricing

Allergan (AGN) CEO Brent Saunders says he understands, and even agrees with, the public outcry over predatory drug pricing decisions. He doesn't mention any of the companies accused of price gouging and profiteering recently, but he's clearly referring to Valeant Pharmaceuticals (VRX) , Mylan (MYL) and Turing.

In a blog post Tuesday, Saunders said Allergan will act differently, pledging to limit price increases on drugs the company sells as part of a "commitment to innovation, access and responsible pricing ideals."

Saunders:

Where we increase price on our branded therapeutic medicines, we will take price increases no more than once per year and, when we do, they will be limited to single-digit percentage increases. Our expectation is that the overall cost of our drugs, net of rebates and discounts, will not increase by more than low-to-mid single digits percentages per year, slightly above the current annual rate of inflation.

The Allergan pricing pledge is noteworthy because it goes against the common practice followed by biotech and pharma companies to raise prices on drugs two or three times per year. Collectively, these multiple, double-digit price hikes mean drug costs can greatly exceed the annual rate of inflation.

Furthermore, Saunders says Allergan will no longer engage in the practice of taking major price increases without corresponding cost increases as products near patent expiration.

"While we have participated in this industry practice in the past, we will stop this practice going forward," Saunders writes.

You can read Saunders' blog post on Allergan's new drug-pricing practices here.

Shares closed Friday at $235.96.

Allergan is a holding in Jim Cramer's Action Alerts PLUS Charitable Trust Portfolio. Want to be alerted before Cramer buys or sells AGN? Learn more now.

Adam Feuerstein writes regularly for TheStreet. In keeping with company editorial policy, he doesn't own or short individual stocks, although he owns stock in TheStreet. He also doesn't invest in hedge funds or other private investment partnerships. Feuerstein appreciates your feedback; click here to send him an email.

More from Stocks

Procter & Gamble Helps Lead Dow Jones After Upgrade From Morgan Stanley

Procter & Gamble Helps Lead Dow Jones After Upgrade From Morgan Stanley

Hey Investors, Don't Let the Bad Times Pollute Your Mind

Hey Investors, Don't Let the Bad Times Pollute Your Mind

Make This Dividend Aristocrat a Staple of Your Portfolio

Make This Dividend Aristocrat a Staple of Your Portfolio

Join Jim Cramer's Club During Our '12 Days of Holiday Deals' Sale and Save 66%!

Join Jim Cramer's Club During Our '12 Days of Holiday Deals' Sale and Save 66%!

It's Harvest Season for Tax Losses

It's Harvest Season for Tax Losses