Novo Nordisk becomes latest pharma to criticize pricing system
- As the drug pricing debate rages on, diabetes drugmaker Novo Nordisk is positioning itself to be a champion of patients, saying it will limit price increases to single-digits annually and pledging to work with pharmacy benefit managers (PBMs) to make pricing more predictable.
- Amid strident criticism, Novo Nordisk is one of several major drugmakers speaking out about the pricing system in the U.S. and how patients may not be aware of how the system works.
- Allergan CEO Brent Saunders has been outspoken about pricing conditions and has vowed to keep increases low, while Mylan CEO Heather Bresch has been put in the spotlight on pricing after the EpiPen controversy.
Novo Nordisk claims it is going to transform the pricing system in the U.S. by making price increases more predictable for payers.
"News reports on drug prices have left the public with an impression that companies like ours realize all the profits from the 'list price' increases we’ve made over the last decade. As the manufacturer, we do set the 'list price' and have full accountability for those increases," said Novo's Head of North American Operations Jakob Riis in a recent statement.
Novo used charts on its website to show the difference between list price, which increased sharply over the last few years, and net price, which stayed relatively flat.
"However, after we set the list price, we negotiate with the companies that actually pay for the medicines, which we call payers. The price or profit we receive after rebates, fees and other price concessions we provide to the payer is the 'net price.' The net price more closely reflects our actual profits," he explained.
Mylan's Bresch has taken a similar stance in her statements to the media on pricing, blaming a system that limits profits and reflects badly on innovative companies.
"For Novo Nordisk, those price increases were our response to changes in the healthcare system, including a greater focus on cost savings, and trying to keep up with inflation," wrote Riis.
"However, as the rebates, discounts and price concessions got steeper, we were losing considerable revenue – revenue we use for R&D, sales and marketing, education, disease awareness activities and medical information support," he added.
Novo Nordisk has faced particular hardships due to pricing. The company derives nearly 80% of its revenues from its diabetes drugs, particularly insulins, which have been some of the drugs hardest hit by pricing competition.
Recently, Novo has seen a precipitous drop in revenues and has resorted to staff cuts, as well as a change in leadership in hopes of fighting back. Meanwhile, it's competition — like Eli Lilly &Co and Sanofi — is more diversified.
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