Government intervention isn't the answer to keeping drug prices in line, Allergan CEO Brent Saunders said Thursday.
The pharmaceutical company, which makes products such as Botox, recently pledged to limit annual increases on prescription drugs — and Saunders believes others can do the same.
"This isn't something the government can solve, because it isn't a bright line — it's a facts and circumstance test. And so I'd rather industry self-police, which is what Allergan is doing. We're making a very bold commitment to say we're not going to engage in this practice," he said in an interview with CNBC's "Closing Bell."
On Tuesday, Saunders announced the company would raise prices no more than once a year and would keep price increases to no more than low-to-mid-single-digit percentages, slightly above the current annual rate of inflation.
Instead of getting pushback from the drug industry, Allergan has gotten positive feedback, he said.
"I've heard from numerous employees all over the world. ... I've heard from physicians, I've heard from shareholders, I've heard from peers, I've heard from smaller company CEOs, all very encouraging feedback so far."
The pharma industry has been under a microscope since Mylan hiked the price of its EpiPen to $600. The outrage has caught fire politically, and Democratic presidential nominee Hillary Clinton has said if elected, she would create an oversight panel to monitor price increases and impose penalties for unjustified hikes.
However, Saunders said it isn't easy to determine who is an outlier company. Instead, it comes down to the facts and circumstances surrounding the price increase.
"If you're taking old drugs and you're building an entire business model over price increases versus investing in innovation and looking for cures and treatments for unmet medical needs, then you are probably moving into an egregious pricing condition."
Saunders said his comments weren't meant to be a criticism of any particular company. However, when asked if Mylan could lower the price of the EpiPen, he responded, "If they wanted to cut the price of the drug, they could do it. We can do it, they can do it, anybody can do it."