NovartisCEOs warned Tuesday that U.S. drug pricing policies under President Donald Trump have created a “very difficult situation” and that reality will soon catch up with both drug companies and patients.
“The long-term implications are significant,” CEO Vasu Narasimhan told CNBC’s Carolyn Ross. “The reality of MFN will emerge within the next 18 months.”
He said Novartis is committed to forcing governments in Europe and Japan to quickly change the way they value innovation, adding that failing to do so could delay the entry of new drugs into these markets and potentially prevent patients from getting them.
President Trump’s most-favored-nation drug pricing policy (MFN), implemented last year, means that prices in the highly lucrative U.S. market are tied to prices in wealthier countries. President Trump has made lowering drug prices for Americans a priority and has long criticized what he calls “foreign countries that are freeloading on American-funded innovation.”
Narasimhan’s comments echo those of other drugmakers who lament Europe’s fragmented markets, red tape and pricing policies.
Roche and AstraZeneca are among the companies that have recently warned that European countries risk missing out on new medicines unless they address declining drug spending and unfavorable policies.
“We’re going to be in a situation where we have to make difficult trade-offs,” Narasimhan said, adding that he hopes to find alternative solutions for patients to access critical medicines.
Narasimhan told CNBC that MFN’s impact on Novartis’ revenue and earnings is still limited, as it currently affects about 5% to 10% of sales, primarily in the Medicaid division.
He added that although there had been “good early discussions” with European governments, not enough action had been taken yet. “There’s an awareness, but I don’t think there’s an awareness yet of the level of impact that’s going to occur.”
Earlier this month, Germany announced plans to cut costs in its national healthcare system, including introducing deep discounts on patented medicines, to tackle a looming multibillion-euro funding shortfall.
“We’ve seen recent moves by the German government, for example, that are really going in the wrong direction. So that’s very worrying,” Narasimhan said.
“These governments are going to have to take this issue seriously going forward, because the (most-favoured nation) policy is in place and I don’t see it going away in the United States.”
lack of revenue
Novartis also reported on Tuesday that its quarterly sales fell for the first time in more than two years, as competition from generic drugs weighed on the drugmaker’s sales.
Shares fell 2.9% in Zurich morning trading.
The Swiss company’s first-quarter sales were $13.1 billion, below the $13.5 billion expected by analysts polled by FactSet and reflecting a 1% year-over-year decline. Sales decreased 5% excluding currency effects.
Earnings per share were $1.65, down 10% from the same period last year.
Citi analysts said the failure was due to faster-than-expected market penetration of generic versions of the company’s best-selling drugs Entresto, Promacta and Tasigna, each of which declined 7% to 17%. The decline in sales was only partially offset by growth in new drugs such as breast cancer drug Kisqari and multiple sclerosis drug Kesimpta.
Sales of Entrest, a heart disease drug, fell by 42% after its patent expired in the United States. It will lose its European exclusivity later this year.
“We had a difficult first half. We knew these generic drugs were coming. In fact, this is the biggest loss of exclusivity in Novartis’ history,” Narasimhan said.
Novartis said it expects growth to accelerate in the second half of this year.
