- Novartis expects quickening sales of cancer drugs and new medicines like Cosentyx will help it deliver revenue growth at the top end of its predicted range for 2018. But the Swiss pharma will have to accomplish that goal without the added boost of price hikes in the U.S., after deciding in June to defer planned increases for the rest of the year.
- Company CEO Vas Narasimhan told analysts Wednesday that Novartis had decided it would be "prudent" to withdraw price increases that were set for July 1, citing ongoing discussion around the Trump administration's drug pricing plan.
- Left unsaid was whether Novartis had feared a public attack from President Donald Trump like the one Pfizer sparked last week by moving ahead with the industry's traditional July 1 price increases on several dozen of its products. Novartis emphasized its decision was made before Pfizer's showdown with Trump.
Novartis has marked 2018 as the year it returns to growth after three years of falling core operating profits in dollar terms. A strong first half of the year puts that goal within reach.
Yet in the U.S., the pharma has pledged it won't pull one of the two primary levers drugmakers have at their disposal to boost revenues and bolster margins. For the remainder of 2018, Novartis will put on pause price increases for its medicines, counting on strengthening prescription uptake to deliver on its financial goals.
"We looked in June at the overall situation, the blueprint coming out and made the decision prior to some of the recent events that we were going to withdraw any further price increases and make a commitment internally that we are not going to take any further price increases for the remainder of 2018," Narasimhan said in an July 18 call with analysts.
Narasimhan also noted that net prices — accounting for rebates and discounts, in other words — across Novartis' portfolio are currently flat to declining in the U.S.
In deferring price hikes, Novartis appears to be taking proactive steps to avoid the kind of public confrontation its pharma peer Pfizer found itself in earlier this month. On July 9, President Trump sharply criticized Pfizer for moving ahead with price increases on about 40 of its several hundred prescription and over-the-counter medicines.
One day later, after Pfizer CEO Ian Read spoke with Trump, Pfizer announced it would roll back the price increases it took on its medicines and defer any new changes until the administration's drug price blueprint came into effect or next year — whichever occurred first.
Novartis also suggested its decision was made with an eye toward the president's blueprint, although Narasimhan implied immediate action from the administration on that front would be unlikely.
"I think there is going to have to be a lot of discussion of course and a lot of input, I’m sure, the administration is going to receive before actually being able to enact any changes," Narasimhan said.
The CEO plans to watch how policy discussions unfold before deciding on a path forward for 2019.
"Many factors influence our decisions to change product prices for our U.S. portfolio and it is not uncommon for us to adjust plans for price changes," said a Novartis spokesperson in an emailed statement.
Although Novartis and Pfizer came to their respective decisions in different ways, it's worth considering what the combined effect might be for the industry. The majority of drugmakers are yet to report second-quarter earnings, and pricing is sure to be a question on many analysts' minds after recent news.
A Bloomberg report from earlier this month indicated Roche, Novo Nordisk and Gilead had also paused or canceled planned price hikes on some of their products.
Novartis' decision might have come before Pfizer's, but it's possible other political issues played a role. The drugmaker is under new scrutiny over $1.2 million it paid Michael Cohen, Trump's personal lawyer, for advice on U.S. healthcare policy he was unable to deliver. A report issued by Senate Democrats earlier this month showed the company's contacts with Cohen were more extensive than previously indicated.
Questions on pricing aside, Novartis delivered a second quarter that beat market expectations for overall group revenue.
Cosentyx (secukinumab), in particular, rebounded after a slow first quarter had sparked some investor concerns on the impact of new rivals. Sales of IL-17A inhibitor totaled $701 million over the period from April to June, and the drug still retains a wide edge in new prescription share over Eli Lilly's rival Taltz (ixekizumab).