Raphael Stevens

Pfizer appears to be on its way toward stabilizing its business and winning back Wall Street’s favor after the sudden decline of its Covid business.
But the company is struggling to balance that with the concerns and fears of its workers.
CNBC spoke about the dizzying climb of Pfizer’s business, its rapid decline and turnaround strategy with 11 current and former employees, all of whom asked to remain anonymous for fear of retaliation. 

Kena Betancur | Corbis News | Getty Images

Pfizer had a “phenomenal” first quarter — and Wall Street took notice, CEO Albert Bourla told thousands of employees during a companywide town hall on May 2, according to a recording heard by CNBC. 
A day earlier, the pharmaceutical giant’s stock had closed 6% higher after its quarterly results topped analyst estimates and it hiked its full-year outlook. 

It was a far cry from the year prior, when Pfizer’s shares plunged more than 40%, making it one of the worst-performing large pharmaceutical stocks of 2023. Its market cap of about $157 billion is now less than half of its 2021 peak of nearly $350 billion.  
Few companies benefited from the pandemic as much as Pfizer did. The drugmaker’s profits boomed, fueled by its Covid vaccine and antiviral pill Paxlovid. After Pfizer and German company BioNTech rapidly developed and deployed a lifesaving shot that helped the world emerge from the pandemic, Pfizer drew widespread praise.
Pfizer’s success contributed to its equally jarring fall from grace. When the virus receded in 2023, its Covid products revenue plummeted. The world, which hailed Pfizer as a pandemic hero a few years earlier, no longer needed the company in the same way.
Pfizer may be on its way toward stabilizing its business and winning back Wall Street’s favor after the strong first quarter. But the company is struggling to balance that with the fears of its employees, some of whom said they feel uncertain about their future and unmotivated after the sudden reversal of fortune.
In October Pfizer launched a multibillion-dollar cost-cutting program, slashing research and development spending and laying off hundreds of employees — including in the once-lauded Covid vaccine unit. In May the company said it’s on track to deliver $4 billion in savings by the end of the year.

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Pfizer’s stock surged after it rolled out its Covid vaccine and antiviral treatment, then plunged when the company’s Covid revenue started to drop.

Now, as Pfizer appears poised to turn a corner, the company is trying to boost employee morale to match Wall Street’s optimism. 
CNBC spoke with 11 current and former Pfizer employees — all of whom asked to remain anonymous for fear of retaliation — about Pfizer’s dizzying climb, rapid decline and turnaround strategy.
The company’s seesawing fortunes have fueled uncertainty within Pfizer’s workforce. Most of the current and former employees CNBC spoke with called Pfizer a good place to work, and some current employees said they feel optimistic about the direction of the company after the first quarter.
But other current employees are dissatisfied with where the strategy shift has left them. Some cited higher workloads after teams were stretched thin by budget cuts, a return-to-office policy they said has forced out some remote workers, and doubts about how the business will perform moving forward.
The company’s separate multiyear cost-cutting program announced in May is also stoking fears about the potential for new U.S. layoffs, according to some current workers. Some employees working in certain manufacturing and supply chain divisions, which they believe are likely to be affected by the cuts, described having low morale and motivation to work.
Meanwhile, several former Pfizer employees, most of whom were laid off over the last six months or left voluntarily, said they’re unhappy with how the company handled cost cuts in 2023. Some alleged that Pfizer management provided little transparency around the layoffs and seemed more focused on the company’s stock performance than its staff throughout the process.
During the latest town hall, Bourla told employees that layoffs in the U.S. have been completed but that more are occurring internationally. 
He called the job cuts “very, very painful” and said it was “killing” him to let employees go. 
But he also acknowledged that Wall Street likes the cuts. 
“And, of course, I’m very concerned with everyone that could be affected and impacted by that, but it works,” Bourla said, according to the recording. “And we saw it, how the Street will respond.”
A Pfizer spokesperson said reducing costs will “put us on strong footing towards margin expansion and improved financial returns moving forward.”
The spokesperson added that cutting expenses is one of Pfizer’s five priorities for the year, along with maximizing the performance of new products, innovating its drug pipeline, growing its oncology business with its acquisition of cancer drugmaker Seagen, and allocating capital to increase its dividend, reduce outstanding debt and reinvest in the business.
To cut costs, apart from layoffs the company is trimming its drug portfolio and direct marketing spending, shrinking its real estate footprint and reducing its investment in Covid, among other efforts, said the spokesperson.
The spokesperson said Pfizer does not take the layoffs “lightly” and that the company is “focused on providing our impacted colleagues with the resources and compassion they deserve.”

What went wrong in 2023

Pfizer entered 2023 on a high. 
The company had just capped a record-breaking 2022 with $100 billion in sales, more than half of which came from its Covid vaccines and Paxlovid.
Employee morale at Pfizer was relatively high at the time, some current and former workers told CNBC. The company had gone on a hiring spree and piled money into different projects, they said.
The success came with trade-offs. Two former employees involved in developing the Covid vaccine manufacturing process said they were experiencing burnout at the start of 2023.
In January 2023, Pfizer forecast a steep drop in annual revenue, to between $67 billion and $71 billion. That outlook included $13.5 billion and $8 billion in sales of Covid vaccines and Paxlovid, respectively.
But it could not predict at the time just how much revenue would dry up. 

Pfizer’s Covid vaccine Comirnaty, seen at a CVS Pharmacy in Eagle Rock, California, Sept. 14, 2023.
Irfan Khan | Los Angeles Times | Getty Images

During an earnings call that same month, Pfizer executives said they expected roughly 24% of the U.S. population to get an annual Covid booster in 2023. But by December, only around 17% of U.S. adults had received the new Covid shots from Pfizer and Moderna, according to data from the Centers for Disease Control and Prevention.
Many Americans who got previous Covid shots felt they did not need more protection because the threat of the virus had diminished, according to recent surveys.
Meanwhile, use of Paxlovid in the U.S. was dented by reductions in Covid testing and infection rates, and by doctors’ concerns about interactions with common medications, among other factors.
As demand plummeted, the federal government returned millions of the antiviral treatment courses to Pfizer. In January this year, however, Pfizer said fewer courses were returned by the end of 2023 than it had expected.
The company soon acknowledged the challenges its Covid business faced towards the end of 2023. In October, Pfizer said it slashed both ends of its 2023 sales guidance by around $9 billion “solely due to its Covid products.”
At the same time, Pfizer started to cut costs. The company still hasn’t said how many employees it laid off, though it reduced staff around the world. 
Pfizer’s 2023 revenue ultimately came in at $58.5 billion, including $11.22 billion from its Covid vaccine and $1.28 billion from Paxlovid.
The end of the year brought other challenges for Pfizer: The company scrapped the twice-daily version of its experimental weight loss drug, danuglipron, and saw slower uptake for a newly launched RSV vaccine in the U.S. than competitor GSK saw with its own version.
After the string of difficulties, investors showed relief when Pfizer announced the cost cuts. But for many employees, the shift in post-pandemic strategy was a nightmare, they told CNBC.
During a conference in January, Bourla acknowledged that 2023 was a rough year for the company and its stock price. But he said Pfizer took steps to start 2024 with a “clean slate.”
Those included renegotiating multibillion-dollar Covid contracts with the EU and other governments, transitioning its Covid products to the commercial market in several countries and writing off unused stock of its vaccine and Paxlovid.
“So it’s not simple, how many people will use the vaccine. There were a lot of things we had to remove” he said.
Bourla also touted Pfizer’s portfolio of new products that it said will boost sales, including nine new product approvals in the U.S. last year and a pipeline of drugs that could bring in more future revenue. 
Pfizer has also repeatedly said that the Seagen deal brings a proven antibody-drug conjugate platform that enhances its commercial structure and could help the company become a “world-class oncology leader.” Pfizer has said Seagen could contribute more than $10 billion in risk-adjusted sales by 2030 with its targeted cancer therapies.
Those revenue streams would help Pfizer prepare for upcoming patent expirations for blockbuster drugs, including its breast cancer treatment Ibrance, and Eliquis, a blood thinner it shares with Bristol Myers Squibb.

A ‘slap in the face’ 

Some current and former employees said they knew early in 2023 that wide-scale layoffs were possible. Those people alleged that Pfizer has long had a culture of hiring too many people and later laying many employees off — a cycle seen at many other large companies. 
Pfizer wasn’t the only Covid-boom company whose business declined. 
Biotech company Moderna’s revenue from its Covid shot also plunged in 2023. Companies outside the pharmaceutical industry that flourished in 2020, including fitness firm Peloton and digital meeting platform Zoom, also struggled to adjust as people returned to their pre-pandemic lives.
Other drugmakers big and small are still downsizing and restructuring their workforces. Big pharmaceutical companies, such as Bristol Myers Squibb, are trying to conserve cash as they could lose revenue from upcoming drug patent expirations and Medicare drug price negotiations, among other threats.
Biotech companies are also working to stay afloat after a rough 2023 marked by rising interest rates, a poor deal market and a lack of fundraising.
At Pfizer, there were other warnings of trouble ahead, according to current and former employees: a small round of layoffs during the first quarter of 2023 and budget restrictions that limited travel, team lunch outings and purchases of new lab and manufacturing equipment. 
Pfizer’s announcement in March 2023 that it would acquire Seagen for a whopping $43 billion was another sign, according to some current and former employees. While most of the 11 workers acknowledged that the deal made sense for Pfizer’s growth, they said the hefty price tag at a time when Covid sales had already started to decline left them uneasy.
Still, a few former employees said they felt blindsided by the company’s decision to let go of staff, saying they were relatively optimistic about the business before the October cost-cut announcement. 
One former employee who worked at a site focused on gene therapies in Durham, North Carolina, said they were repeatedly told their job would be safe — even as Pfizer divested much of its early stage portfolio for those treatments at the start of 2023. The company confirmed with news outlets in October that it would close that site and lay off an undisclosed number of staff.
Notably, Pfizer’s layoffs also affected some workers involved in the research, development and manufacturing of the company’s Covid vaccine, according to some current and former employees. They said those workers, whom Pfizer celebrated as pandemic heroes just a year earlier, felt especially betrayed by the cuts.
“It felt like we were tossed out the door when they no longer needed us,” said one former employee who worked on the vaccine.

Pfizer CEO Albert Bourla speaks during a press conference after a visit to oversee the production of the Pfizer-BioNtech Covid-19 vaccine at the Pfizer factory in Puurs, Belgium, April 23, 2021.
John Thys | Reuters

All the current and former employees who spoke with CNBC said they believed the company handled the layoffs and the months leading up to them poorly.
Some workers said they were disappointed with what they called higher management’s lack of transparency around the layoffs. Some also questioned why Pfizer did not set more realistic expectations for its Covid business earlier, especially as cases and public concern about the virus diminished in the U.S.
On Oct. 17, just a few days after Pfizer publicly announced its cost-cutting program to investors, executives held a companywide town hall with Pfizer’s more than 80,000-person workforce that one worker described as “disastrous” and another called a “slap in the face.” 
On the town hall, Bourla and Pfizer Chief Human Experience Officer Payal Sahni Becher acknowledged the company’s Covid business was struggling but said it was positioning for growth with the cost cuts, according to some current and former employees.
Those people said the executives addressed the looming layoffs during the town hall but provided scant details on how many workers, teams or sites they would affect, when they would occur or how the company decided who would lose their jobs. 
Many workers also alleged that Bourla and Becher were too casual during the town hall, cracking light jokes and chuckling at some of the questions asked by staff, such as one about employee bonuses.

Return-to-office policies

On top of layoffs, return-to-office policies launched in 2023 forced out some workers in fully remote roles, some current and former employees said.
Those people said some fully remote employees had their virtual work status revoked and were asked to start working in person at their site starting on a certain date under the new mandates. While some workers were asked to come in only two or three days a week, even that was impossible for staff members who lived too far from their sites, according to the employees.
Some remote workers who did not comply over time were let go, the current and former employees said. A Pfizer spokesperson did not confirm or provide any details about its recent return-to-office policies.
“The return to office has been possibly the worst managed factor in all of this,” one current employee said.

People pass by the Pfizer headquarters building in New York City, Jan. 29, 2023.
Kena Betancur | View Press | Corbis News | Getty Images

Those policies also applied to workers who were relocated from recently closed facilities, according to some employees. 
For example, Pfizer in October said it would shut down its office in Peapack, New Jersey in 2024, which affected nearly 800 workers. The company first announced those plans in 2021. Pfizer told news outlets that the majority of employees would be relocated to its headquarters in New York City. 
For one employee, a 15-minute commute to work became closer to an hour-and-a-half trip.
During another town hall, on Oct. 26, Pfizer Chief Global Supply Officer Mike McDermott said the decision to close the Peapack site “wasn’t made lightly.” But he said having Peapack employees work in person at the company’s headquarters was “right for Pfizer’s culture,” according to a recording heard by CNBC. 
He said the company isn’t taking away remote work as an option. Pfizer leadership has been vocal about asking employees to work in person again. 
“Teleconferencing is simply no substitute for the personal interaction that makes it possible to share ideas, build connection, or even agree to disagree,” Bourla said during the APEC CEO Summit in November. 
Pfizer is just one of several companies across different industries to push for in-person work again after the pandemic. Tech giants such as Google similarly reversed course on remote work in 2023 after offering flexibility to employees throughout Covid, reportedly frustrating workers.

Employee morale

Employee morale plummeted in the months after the October layoff announcement, according to current and former employees. 
Some of those people said they were unmotivated to work with their job security in question, while one worker described “walking on eggshells” for weeks out of fear that they would lose their job.
Other employees said they were stretched thin due to understaffing and a lack of other resources. A few workers said they struggled to keep up with abrupt internal changes, such as being assigned to new managers or being moved onto different teams.
Some current employees said Pfizer has held several so-called transparency meetings, which allow workers to anonymously ask questions and provide feedback to senior leadership.
Faith in executive leadership also plunged among some workers, according to most of the current and former employees who spoke with CNBC.
Some employees acknowledged that executives have a duty to care about their company’s stock price but said that Bourla and other officials appeared to be hyper-focused on Pfizer shares even as people lost their jobs.
Some current workers said that hasn’t appeared to change after the town hall on May 2. Others said Bourla’s remarks were encouraging and sounded far more genuine.

People pass by the Pfizer headquarters building on January 29, 2023 in New York City. 
Kena Betacur | Corbis News | Getty Images

Some employees also said they feel uncertain about how the company’s business will perform moving forward.
One current worker called it “reassuring” to see Pfizer report positive first-quarter results but noted that it does not “guarantee smooth sailing” ahead for the business and employees.
Pfizer’s rebound partly hinges on how its once-daily version of danuglipron performs in an early clinical trial this year. It will also heavily depend on the commercial success of Seagen’s pipeline of cancer drugs, though it will likely take several years before Pfizer sees big returns from those products.
During the May 2 town hall, Bourla said he could tell that morale was down toward the end of 2023. 
“I could feel that people were affected,” he said, according to the recording heard by CNBC. “Because we were at the top of the pyramid, we were at the top of our all-time reputation, of our all-time recognition from the world. And suddenly within six months, we started feeling that people are questioning that. That is not something that we like, and it’s not something that we feel good about.”
But Bourla congratulated employees for delivering a strong first quarter. He cautioned that the company isn’t “out of the woods yet” but said it is starting to head in a positive direction. 
“There will be hiccups, ups and downs in our way. But the direction I’m very confident is going to be upwards. I’m sure that sooner rather than later, we will all feel the pride that we were feeling in years ’20, ’21, ’22 and ’23, the first six months,” Bourla said.  More

Tesla is losing its lead over legacy automakers in the quality of its new all-electric vehicles, according to an annual influential study conducted by J.D. Power.
The study attributes Tesla’s growing problems to a negative response from customers after the company removed traditional feature controls, such as turn signals and wiper stalks.
Overall, the study found electric vehicles are plagued with more problems compared to traditional gas- and diesel-powered vehicles with internal combustion engines.

A dog looks out the window from a Tesla electric vehicle charging at a Tesla Supercharger location in Santa Monica, California on May 15, 2024. 
Patrick T. Fallon | AFP | Getty Images

Tesla is losing its lead over legacy automakers in the quality of its new all-electric vehicles, according to an annual influential study conducted by J.D. Power.
The 2024 U.S. Initial Quality Study found the quality of Tesla’s battery-electric vehicles, or BEVs, and those of traditional carmakers were the same, at 266 problems reported per 100 newly sold or leased vehicles.

Previously, Tesla models had outperformed the electric vehicles of legacy automakers in the annual survey. Last year, the Tesla received a rank of 257 problems per 100 vehicles, compared with 265 problems per 100 vehicles on average for EVs from traditional automakers.
The study attributes Tesla’s growing problems to a negative response from customers after the company removed traditional feature controls, such as turn signals and wiper stalks.
Across the broader industry, not just BEVs, Tesla has consistently ranked toward the bottom in initial quality since J.D. Power began including Tesla in the study in 2022.
Overall, the study, which included repair visits data of franchised dealers for the first time, found electric vehicles such as BEVs and plug-in hybrid electric vehicles (PHEVs), are plagued with more problems than traditional gas- and diesel-powered vehicles with internal combustion engines.
“Owners of cutting edge, tech-filled BEVs and PHEVs are experiencing problems that are of a severity level high enough for them to take their new vehicle into the dealership at a rate three times higher than that of gas-powered vehicle owners,” J.D. Power’s senior director of auto benchmarking, Frank Hanley, said in a news release.

The study found that plug-in vehicles require more repairs than gas-powered vehicles across all repair categories.
BEVs averaged 266 problems per 100 vehicles, 86 points higher than gas- and diesel-powered vehicles, which averaged 180 problems per 100 vehicles, according to the study. A lower score indicates higher vehicle quality.
Top concerns included features, controls and displays as well as wireless smartphone integration, as customers reported frequent difficulties with Apple CarPlay and Android Auto.
The study also reported frustration over false warnings, unnecessary traffic alerts and automatic braking features. Specifically, rear seat reminders contribute 1.7 problems per 100 vehicles across the industry, as owners report receiving signals even when no one is in the rear seat.
“It is not surprising that the introduction of new technology has challenged manufacturers to maintain vehicle quality,” Hanley said.
— CNBC’s Michael Wayland contributed to this report.

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Nike cut its full-year guidance and said it expects sales to drop 10% during its current quarter as it warned of soft sales in China.
For the fiscal fourth quarter, the sneaker giant handily beat earnings estimates but fell short on Wall Street’s sales expectations.
Nike executives told CNBC the revenue miss was attributable to a slowdown in lifestyle sales, among other factors.

Nike shoes and logo are seen at a store in Nice, France on May 28, 2024.
Jakub Porzycki | Nurphoto | Getty Images

Shares of Nike plunged on Thursday after the retailer cut its full-year guidance and said it expects sales to drop 10% during its current quarter as it warned of soft sales in China and “uneven” consumer trends across the globe.
The expected 10% first-quarter slump is far below the 3.2% drop that analysts had expected, according to LSEG.

The sneaker giant now expects fiscal 2025 sales to be down mid-single digits, compared to analyst estimates of a 0.9% increase. Nike previously expected sales to grow. The company also expects sales in the first half to be down in the high single digits, compared to previous guidance of declines in the low single digits.
“A comeback at this scale takes time,” the retailer’s finance chief Matthew Friend said on a call with analysts. “Although the next few quarters will be challenging, we are confident that we are repositioning Nike to be more competitive with a more balanced portfolio to drive sustainable, profitable, long-term growth.”
The company cut its guidance as it contends with slower online sales, planned declines in classic footwear franchises, “increased macro uncertainty” in the Greater China region and “uneven consumer trends” across Nike’s markets, Friend said. It also expects sales into wholesalers to be slower as it scales new innovations and pulls back on classic franchises.
Shares plunged roughly 11% in extended trading.
For the fiscal fourth quarter, the company handily beat earnings estimates as its cost-cutting efforts continue to bear fruit, but Nike fell short on revenue.

Here’s how Nike did during the period compared with what Wall Street was anticipating, based on a survey of analysts by LSEG:

Earnings per share: $1.01 adjusted vs. 83 cents expected
Revenue: $12.61 billion vs. $12.84 billion expected

The company’s reported net income for the three-month period that ended May 31 was $1.5 billion, or 99 cents per share, compared with $1.03 billion, or 66 cents per share, a year earlier. 
Sales dropped to $12.61 billion, down about 2% from $12.83 billion a year earlier.
In fiscal 2024, Nike posted sales of $51.36 billion, which is flat compared to the prior year. It’s the slowest pace of annual sales growth the company has seen since 2010, excluding the Covid-19 pandemic.
Nike executives attributed the sales miss to a range of factors. They said its lifestyle business declined during the quarter and that momentum in its performance business, such as its basketball and running shoes, wasn’t enough to offset it.
Online performance was soft because Nike had a higher share of lifestyle products, more promotions and fewer sales of classic franchises, such as its Air Force 1. It also saw traffic in China decline across all channels beginning in April due to macro conditions in the region.
Despite the traffic decline in China, sales in the region exceeded Wall Street expectations, according to StreetAccount, coming in at $1.86 billion, compared with estimates of $1.79 billion. It was the only geographical segment to top estimates for the period.
Sales in North America, its largest market, came in at $5.28 billion, below StreetAccount expectations of $5.45 billion. 
In Europe, Middle East and Africa, Nike posted revenue of $3.29 billion, compared to estimates of $3.32 billion. In Asia Pacific and Latin America, Nike saw $1.71 billion in sales, compared to estimates of $1.77 billion. 
Still, Friend later warned of the “softer outlook” in China and said had it not been for Chinese marketplace Tmall’s early start to the region’s 618 shopping holiday, sales in the country would’ve fallen short of Nike’s internal expectations.
“The China marketplace remains highly promotional, and we continue to manage both Nike and partners’ inventory carefully,” said Friend. “While our outlook for the near term has softened, we remain confident in Nike’s competitive position in China in the long term.”
Nike’s Converse brand was once again a significant underperformer in the overall results. The division saw revenue plunge 18% to $480 million, largely due to declines in North America and Western Europe.

Sneaker leader loses its crown

Over the last few months, the longtime leader of the sneaker and athletic apparel category has found itself in a rough patch, working to stay ahead of a slew of upstart competitors. Its revenue growth has slowed, it’s been criticized for falling behind on innovation and it’s in the process of walking back its direct-sales strategy, which failed to produce the results the company had anticipated. 
Under the strategy shift, Nike had been working to drive sales through its own website and stores rather than through wholesalers like Foot Locker, but it recently began walking back that initiative, telling CNBC in April that it went too far when it moved away from wholesalers.
The strategy can be more profitable and gives companies better control over their brands and customer data, but it can also create logistical headaches and come with unexpected — and costly — hiccups. 
During the quarter, Nike direct revenues came in at $5.1 billion, down 8% compared to the prior year period. Meanwhile, wholesale revenue was up 5% to $7.1 billion, reflecting Nike’s change of heart on direct selling.
According to some analysts, the company’s focus on building out its direct sales strategy led Nike to take its eyes off of innovation — the main attribute that had long made the company stand out. 
As the retailer churned out more and more old favorites, such as the Air Force 1, upstarts like On Running and Hoka wowed runners with brand new designs — and snatched them up as customers. 
Nike has said that it would reduce the amount of products it had on the market in favor of new innovations and is betting that a suite of new styles, along with the 2024 Paris Olympics, can get the company back on solid footing. 
During the company’s conference call, CEO John Donahoe said Nike was accelerating its plans to reduce supply of classic franchises because the brands had performed poorly online, which is expected to affect fiscal 2025 revenue.
“We are taking our near-term challenges head-on, while making continued progress in the areas that matter most to NIKE’s future — serving the athlete through performance innovation, moving at the pace of the consumer and growing the complete marketplace,” Donahoe said in a release. “I’m confident that our teams are lining up our competitive advantages to create greater impact for our business.”
Some of Nike’s challenges are also outside of its control. It has contended with a rough macroeconomic environment that’s seen consumers pull back on sneakers purchases, and it also may be finding itself on the wrong side of trends. Some analysts expect the overall athletic category to face a slowdown this year as denim makes a comeback with consumers and shoppers look to dress up after years of dressing down. 
In the meantime, Nike has focused on cutting costs so it can at least deliver strong profits against unsteady sales. 
In December, it announced a broad restructuring plan to reduce costs by about $2 billion over the next three years. Two months later, Nike said it was shedding 2% of its workforce, or more than 1,500 jobs, so it could invest in its growth areas, such as running, the women’s category and the Jordan brand.
— Additional reporting by CNBC’s Sara Eisen and Jessica Golden

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The cost of prescription medications in the U.S. has increased 37% since 2014, far surpassing the rate of inflation, according to data from drug savings company GoodRx.
Though the price increases have slowed this year in comparison to the past decade, the average American spends $16.26 out of pocket per prescription, according to the data.
On average, Americans pay two to three times more for prescription drugs than consumers in other developed countries, according to the White House.

Mike Mergen | Bloomberg | Getty Images

The cost of prescription medications in the U.S. has increased 37% since 2014, far surpassing the rate of inflation, according to data from drug savings company GoodRx.
Though the price increases have slowed this year in comparison to the past decade, the higher costs are raising out-of-pocket expenses for consumers. The average American spends $16.26 out of pocket per prescription, according to the data.

“When things increase … inevitably, they do trickle down to consumers, especially those who are in a high deductible plan or who don’t have insurance or find themselves paying substantially out of pocket,” said GoodRx director of research Tori Marsh.
GoodRx said the patients’ share of the cost continues to grow due to rising copays, coinsurances and deductibles. The company found that over the past 10 years, the average person’s deductible nearly doubled, and copays are rising as the majority of plans are adding another tier of drugs with higher copays.
It is a dynamic GoodRx deems “the big pinch.” High medication costs are coupled with reduced insurance coverage. Analyzing coverage for more than 3,700 Medicare Part D plans between 2010 and 2024, GoodRx found that the portion of medications covered dropped 19% during that period.
“The impact is really kind of threefold,” Marsh said. “Rising costs or rising prices are a big part of it, but it’s really that with the combination of increased friction. … It’s hard for people to, in some ways, access their medication or access a pharmacy. And then on top of that, insurance is not what it used to be. It’s not covering as much as it used to.”
On average, Americans pay two to three times more for prescription drugs than consumers in other developed countries, according to the White House.

Drug costs have become a focus for President Joe Biden, particularly as he approaches the 2024 election. The Biden administration has taken several measures to lower out-of-pocket drug expenses.
On Wednesday, the White House announced it would lower prices on 64 prescription drugs for some Medicare beneficiaries as a result of inflation penalties on drugmakers.
The lower costs, effective during the third quarter, will benefit roughly 750,000 people who use the drugs annually, some of whom could save up to $4,593 per day, according to the release.
“Despite efforts by policymakers and industry leaders to break down affordability and accessibility barriers, a patient’s actual out-of-pocket cost continues to increase and is often a huge surprise to them,” said GoodRx interim CEO Scott Wagner in a news release.
— CNBC’s Annika Kim Constantino contributed to this report.

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Rivian’s investor event on Thursday that focused on cost-cutting efforts, efficiency gains and in-house technologies wasn’t enough to build on the company’s significant share growth this week.
Rivian shares fell about 2% to 6% for much of the event on Thursday, eating into their 23% gain the day before on news of an up to $5 billion investment by Volkswagen Group.
The EV startup on Thursday reconfirmed its 2024 guidance and outlined longer-term plans to achieve positive adjusted earnings before interest, taxes, depreciation and amortization in 2027.

2025 Rivian R1S

A Thursday investor event for Rivian Automotive that focused on cost-cutting efforts, efficiency gains and in-house technologies and software wasn’t enough to build on the company’s significant share growth this week.
Shares of the all-electric vehicle startup fell by about 2% to 6% for much of the event, eating into some of its 23% gain in shares the day before on news of an up to $5 billion investment by Volkswagen Group. Rivian’s stock closed Thursday down 1.8% to $14.47 per share, off by roughly 39% year to date amid investor concerns regarding cash burn and a slowdown in EV sales.

Rivian on Thursday reconfirmed its 2024 guidance that included production of 57,000 vehicles and a path to positive gross profit during the fourth quarter, including regulatory credits. It also outlined longer-term growths, such as plans to achieve positive adjusted earnings before interest, taxes, depreciation and amortization in 2027.
“Everything that you’re hearing from us, around our product, around how we’re running the business, around how we’re driving toward profitability, my hope is that you’re seeing really an extreme sense of urgency,” Rivian CEO RJ Scaringe said during the event. “We’re very, very fast driving towards the improvements necessary to get to positive free cash flow and, before that, positive margins this year.”

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Rivian’s stock performance

Rivian also outlined long-term financial targets of a roughly 25% gross margin, 10% free cash flow and adjusted profit margin in the “high teens.” The company did not release a time frame for these targets.
Scaringe spent much of his time during the roughly four-hour presentation discussing efficiencies in products and manufacturing, which he said are expected to lead to 20% material cost reductions in its current vehicles, followed by 45% targeted reductions in its upcoming “R2” vehicles, which are projected to begin production in early 2026.
The reductions range from physical savings, such as a 54% decrease in design costs of its R2 vehicles compared with current models, to lower costs on more complex systems such as battery packs and electrical hardware. For example, the company is using 10 fewer in-house electronic control units, or ECUs, in its recently redesigned R1 vehicles, allowing it to remove 1.6 miles in wiring harness length and 44 pounds out of the vehicle.

Rivian’s software expertise is at the center of VW’s plans to invest $5 billion in the automaker by 2026, including an anticipated joint venture between the companies to create electrical architecture and software technology.
Volkswagen is expected to use Rivian’s electrical architecture and software stack for vehicles beginning in the second half of the decade, Scaringe said during the investment announcement. He said the joint venture does not include anything with battery technologies, vehicle propulsion platforms, high voltage systems or autonomy and electrical hardware.

A provided image of Oliver Blume, CEO of Volkswagen Group and RJ Scaringe, founder and CEO of Rivian, as the companies announce joint venture plans on June 25, 2024.
Courtesy: Business Wire

Rivian finance chief Claire McDonough reaffirmed Thursday that the capital from VW is expected to strengthen the startup’s balance sheet, which ended the first quarter with $7.9 billion in cash.
The capital influx is expected to carry Rivian through the production ramp-up of its smaller R2 SUVs at its plant in Normal, Illinois, starting in 2026, as well as production of its midsize EV platform at a currently paused plant in Georgia.
Rivian is betting on its next-generation all-electric vehicles to carry the automaker’s growth and targeted profitability during the second half of this decade.
The company said Thursday it expects production of its R2 next-generation vehicles to represent up to 72%, or 155,000 units, of its more than 200,000-unit production capacity at its plant in Illinois. The plant currently has the capability to produce 150,000 commercial delivery vans as well as its flagship R1 SUV and pickup EVs.
The automaker’s $2 billion plant in Georgia, construction of which was suspended earlier this year to save capital, is expected to be capable of producing 400,000 units on two lines.
That construction suspension was a major part of the company’s plans to reduce planned capital expenditures by $2.5 billion through 2025, including reductions of 55% in manufacturing and 20% in product development. The company still expects to spend about $2.7 billion through 2025, McDonough said Thursday.
“We’ve focused on material cost and really reducing the overall cost of goods sold, as well as our operating expenses,” she said. “Capex is another key lever for us that we focused on as well over the course of the last few years that will be central to our long-term success in bringing and scaling our R2 in the market.”

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