Novo Nordisk sees pricing challenges 'intensifying'
- Danish drugmaker Novo Nordisk scaled back its expectations for sales and operating profit growth this year as it eyes an increasingly competitive diabetes market and a more restrictive pricing environment in the U.S.
- Operating profits are now forecast to grow by between 5% and 8%, compared to Novo's previous expectation of as high as 9% growth.
- Following recent negotiations with U.S. pharmacy benefit managers (PBMs), Novo said last week it anticipates average prices after rebates to be "moderately lower" in 2017, particularly in the basal insulin and human growth hormone markets.
Although Novo Nordisk expects to maintain similar market access to its diabetes drugs in 2017, chief executive Lars Rebien Sorensen said pricing would become more challenging due to "intensified pricing competition" and stricter controls by major PBMs.
"In the U.S., the market environment is becoming increasingly challenging and contract negotiations for 2017 have reflected an intensified price competition," Sorensen said, speaking on a call with investors following the release of Novo's earnings.
CVS Health and Express Scripts, two of the largest PBMs in the U.S., both recently signaled a tighter market for diabetes drugs in the year to come, releasing their formularies and excluded medications lists.
Express Scripts said it would exclude Novo Nordisk's top-earning GLP-1 agonist Victoza from its formulary, favoring drugs from AstraZeneca and Eli Lilly instead.
CVS Health's formulary, on the other hand, underscored the looming biosimilar threat to diabetes biologics. Eli Lilly and Boehringer Ingelheim's new "follow-on biologic" will now replace Sanofi's aging mainstay insulin Lantus. Eli Lilly expects to begin marketing Basaglar in the U.S. beginning in December this year.
Novo's Sorensen thinks PBMs may lump Lantus and Basaglar into a similar category, hoping his company's long-acting insulin Tresiba can carve out its own space after new switching data comparing Tresiba to Sanofi's Toujeo comes out.
"It is our anticipating and our expectation...that we will see a bifurcation of the basal market," Sorensen said.
"There will be one group of products which would be viewed as similar. That would, of course, in particular, be Lantus and Basaglar because they are biosimilar...Based on our expectation, the switch data will be able to improve the label of Tresiba and then we will find Tresiba in a separate category of the basal market."
Tresiba saw dramatic growth in the first half of 2016, hitting roughly $215 million in sales (compared to about $80 million over the first six months of 2015). Sorensen said Tresiba now commands a 2.9% share of the total basal insulin market in the U.S. and Novo hopes to increase that to 5%.
Novo has developed an experimental drug combining Tresiba with Victoza for treatment of type 2 diabetes. An advisory panel to the Food and Drug Administration unanimously recommended approval for the treatment, called IDegLira, in May.
The Danish drugmaker also has high hopes for another drug in development called semaglutide. Like Victoza, semaglutide is a GLP-1 agonist which is designed to be administered once-weekly rather than once-daily.
Sorensen sees Victoza and semaglutide as a part of a dual strategy to counteract the stricter formulary enviornment.
"We think that GLP-1 product ought to be used by far more diabetes patient than it currently is. In the future, there will be options for patients to use a daily product or a weekly product," explained Sorensen.
"I think we'll be in a very good position to assist in expanding the market and in reality, I think, the market in the future will be a market between Eli Lilly and ourselves."
Follow Ned Pagliarulo on Twitter