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Alnylam CEO backs inflation-based drug price hikes, welcomes Amazon's foray into health care

  • Before the approval of Alnylam's first drug, CEO John Maraganore backed the idea of raising prices pegged to inflation.
  • Maraganore also said he welcomes a conversation with Amazon to disrupt drug distribution.

As Alnylam Pharmaceuticals nears approval of its first drug, the fledgling drug-maker is planning to transition out of research and development into the commercial stage.

That means figuring out a pricing strategy, and CEO John Maraganore said he supports the idea of pegging increases in drug prices to the rate of inflation.

"It's hard to justify drug price increases," Maraganore said on CNBC's "Power Lunch." If you price a drug appropriately, where it ought to be priced, whats the rationale of increasing the price every year?"

"It's hard for our industry to defend that, overall," he added.

That breaks down to a price increase of approximately 2 to 3 percent yearly, which pales in comparison to increases industry-wide. Drug costs have skyrocketed in recent years, with some prices surging more than 1,000 percent per year.

Companies argue profits from inflated drug pricing help them grow and fund more drug development. Alnylam hopes to take almost the opposite approach, growing through innovation.

"At Alnylam, we've got a really robust product engine. We have the ability of generating, with our platform, a steady flow of new medicines. We just don't have to rely on drug price increases as a way of fueling future growth for the company," he said.

Despite his optimism, the company had high-profile drug failures. Stock struggled late last year when the company was forced to halt development on drug revusiran, after a late-stage study revealed it increased risk of death in test subjects.

Still, Maraganore feels confident that Alnylam's next drug, patisiran, is nearing approval, and the company has a few additional drugs in the pipeline. Stock has responded accordingly, up more than 257 percent year-to-date.

Maraganore also looked ahead to what drug distribution could look like in the near future. Alnylam aims to be there when Amazon makes more decisive moves into the health-care industry, according to the CEO.

"It could be very disruptive from distribution model to have a company like Amazon in the space," Maraganore said. "We welcome a conversation with Amazon to ... understand how we can work together to make sure patients get access to important medicines."