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Novartis CEO predicts drug pricing overhaul in U.S. after the election

July 21, 2016
Life sciences

With both U.S. presidential candidates promising action on drug prices, November’s election could trigger a sea change in the industry, Novartis CEO Joe Jimenez figures.

In an interview with the Financial Times, Jimenez predicted that pricing pressures in the U.S. will only increase when a new administration takes over, whether that administration is helmed by Democrat Hillary Clinton or Republican Donald Trump.

“We believe that, no matter which candidate wins, we will see a more difficult pricing environment in the U.S.,” Jimenez told the Financial Times, adding, “We all have to plan for new pricing models in the US that could help us ensure the sustainability of the system as the population ages.”

Clinton has proposed a range of measures to crimp drug prices, including reimportation of meds–particularly those where U.S. prices are at least double those in other countries–under standards set by the FDA. Trump has also said he wants the U.S. to have access to imported drugs. Clinton also backs a monthly cap on out-of-pocket prescription costs for patients.

U.S. pressure wouldn’t stop at the country’s borders, either, Jimenez predicted, with ripple effects particularly affecting Europe. Drugmakers “will be in trouble” if they don’t adapt, he told the newspaper.

Those new pricing models include pay-for-performance deals such as those Novartis recently struck with top insurers Cigna and Aetna. The arrangements are based on clinical trials that showed Novartis’ new heart failure drug Entresto could keep patients out of the hospital: If the drug performs as promised, rebates decline; if not, rebates will increase. Sanofi, Regeneron and Amgen have also struck results-based agreements with payers on their pricey PCSK9 cholesterol fighters.

Jimenez has been a big proponent of pegging drug prices to their real-world results. He sees that approach as a way for drugmakers to capitalize on truly innovative, effective meds and discourage development of drugs that offer only incremental benefits.

He also predicts that results-based drug payments would cut overall healthcare costs. “If you move to that kind of pricing system over a period of years, you will be able to take out a lot of waste,” he said last year.

Pricing pressure is already taking a bite out of Novartis sales, the company said in its second-quarter earnings release. Price erosion at its generics unit, Sandoz, dragged sales down by 5 percentage points, while volume grew by 8 percentage points. In the pharma division, volume grew by 6 percentage points, but sliding prices bit 1 percentage point off that growth.

Evercore ISI Group analyst Umer Raffat charted price erosion in Novartis’ generics-focused Sandoz unit after Tuesday’s earnings release, showing that pricing had suffered by up to 8% quarterly over the past 12 months.

By Tracy Staton

Source: Fierce Pharma

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