The Impact of Johnson & Johnson’s Price Increases for Stelara on Pharmaceutical Innovation

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 Johnson & Johnson, a multinational healthcare conglomerate with pharmaceutical treatments in oncology, immunology, and neurology, as well as large divisions in medical diagnostics and consumer health products. 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.

Johnson & Johnson Case Study

• Headquarters: New Brunswick, N.J., United States
• Drug Analyzed: Stelara (ustekinumab)
• 2021 Company Revenue: $52.1 billion
• 2021 R&D Spending: $11.9 billion
• Other Key Products: Darzalex (daratumumab), Imbruvica (ibrutibib), Remicade (infliximab), Invega Sustenna (paliperidone palmitate), Xarelto (rivaroxaban)

Though Johnson & Johnson’s company-wide revenue is the highest of any pharmaceutical company, a significant portion of its revenue comes from medical devices and consumer products. As for its pharmaceutical revenue, J&J subsidiary Janssen Pharmaceuticals brought in more than $52 billion in 2021, led by therapeutics in the disease areas of immunology and oncology.

We analyzed J&J’s pricing behavior for Stelara over the last 10 years. Since 2011, the company has raised the net price on Stelara more than 109 percent at its peak in 2020, with much of the price increase occurring from 2012–2016.

Stelara’s revenue is driven roughly equally by price and unit volume increases over the last decade. Nearly 58 percent of the drug’s revenue growth came from price increases alone, totaling $13.8 billion over 10 years.

If the price of Stelara remained flat since 2011, the loss of $13.8 billion in revenue would have resulted in $2.9 billion less in R&D spending. We estimate that, based on the drug development scenarios used in our analysis, Johnson & Johnson spends $8.2 billion (IQR: $6.5-$9.7 billion) per new drug developed. Therefore, Johnson & Johnson would develop 0.36 fewer drugs.

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