Novartis Puts A Halt To Drug Price Increases While Awaiting More On Trump's Blueprint

Novartis joined Pfizer in agreeing to hold off on any further US drug price increases this year, saying the decision was prudent in the current environment. On Trump's drug pricing blueprint, Novartis said it is carefully monitoring how policy evolves this year before charting a course for 2019.

Novartis AG is the second big pharma behind Pfizer Inc. to declare that it will hold off on raising the prices of any drugs in the US for the remainder of the year, as it awaits clarity on evolving drug policy.

CEO Vas Narasimhan announced the decision during the company's second quarter earnings call July 18 in which the company said it delivered strong sales of new drugs like Cosentyx (secukinumab) and the heart failure drug Entresto (sacubitril/valsartan), but also said it is facing some manufacturing challenges with its new cancer cell therapy Kymriah.

"We looked in June at the overall situation, the blueprint coming out, and we made the decision prior to some recent events that we were going to withdraw any further price increases and make a commitment internally that we wouldn't take any further price increases for the remainder of 2018," Narasimhan said.

HHS Secretary Alex Azar took to Twitter to clap Novartis on the back for its decision and give some credit to Trump. "@POTUS has made clear that it's time for drug companies to put American Patients First – Novartis halting its prescription drug increases is a step in the right direction and a win for American patients."

Nonetheless, Novartis increased prices on drugs in the first half of the year, including more than once for some drugs, where prices were raised by 6.9% in the first quarter, followed by 2.8% increases in the second quarter, according to an analysis by Morgan Stanley.  

President Trump has made lowering US drug prices one of his core policy goals. In May, the administration released a drug pricing blueprint that outlined many ideas for lowering healthcare spending on drugs, but actual concrete policy changes are expected to take significant time and debate to implement.

But in July, as drug makers began implementing their standard annual price increases, the issue got heated when Trump took to Twitter to publicly shame Pfizer for raising prices on drugs. (Also see "Trump Tries To Shame A Defiant Pfizer On Drug Pricing" - Scrip, 9 Jul, 2018.) Then, surprising many in the industry, Pfizer walked back its decision after CEO Ian Read talked to President Trump. Pfizer vowed not to raise US drug prices before the end of the year or until the president's blueprint goes into effect.  (Also see "Pfizer Agrees To Roll Back Prices On 40 Drugs, Yielding To Pressure From Trump" - Scrip, 10 Jul, 2018.)

Novartis has faced its own public shaming, though not from Trump's Twitter handle. The company came under fire in May when it came to light it made questionable payments to Trump's attorney Michael Cohen for consulting. (Also see "You Work In The Pharmaceutical Industry; Here's Why You Should Care About The Novartis Payments " - Scrip, 9 May, 2018.) In July, more information trickled out about how Novartis' former CEO Joseph Jimenez emailed a list of drug pricing initiatives to Cohen for Trump to review. [A#PS123502]

US drug pricing and Trump's blueprint are expected to be big themes for the industry during the second quarter sales and earnings releases. The second quarter results kicked off July 17 with Johnson & Johnson reporting. CEO Alex Gorsky did not walk exactly the same line as Read and Narasimhan by promising not to increase US drug prices, but he did acknowledge that drug prices will be a headwind for the company through the remainder of 2018. J&J told investors to anticipate a negative 4% to 6% impact from pricing. (Also see "As J&J Sees Continued Drug Price Declines, CEO Urges Slow Policy Change Via Trump's Blueprint" - Scrip, 17 Jul, 2018.)

Narasimhan also reiterated that Novartis' US net prices – after rebates and discounts – are flat to declining.

On Trump's drug pricing blueprint, he said the company is supportive of some elements: reforming Medicare Part B, reforming 340B, enabling faster and broader access to biosimilars, and reforming the US rebate structure. Several bills currently moving through the US Congress are aimed at reforming the 340B discount program, which allows for cheaper drugs for eligible hospitals and clinics that service low income and uninsured patients. (Also see "340B Reform: US House Bills Mark The End Of The Beginning" - Pink Sheet, 12 Jul, 2018.)

But echoing calls from other industry leaders, Narasimhan added, "I think there is going to have to be a lot of discussion of course and a lot of input the administration is going to receive before being able to enact any changes."

"What we plan to do is watch how this evolves over the remainder of this year and then chart a course for 2019 moving ahead," he said.