Remember the days when drugmakers could raise prices without sparking political pushback? Novartis ($NVS) CEO Joe Jimenez does--and he says they're not coming back.
"Those days are over," he said in a Bloomberg Television interview. "You have to assume that there is going to be increased price pressure in the U.S."
That pressure has been mounting, with Congress taking a hard look at drug prices and presidential candidates spurring public debate. Lawmakers have zeroed in on a pair of Valeant Pharmaceuticals ($VRX) price hikes, on two heart meds it bought from Marathon Pharmaceuticals, but media reports have also highlighted a slate of Big Pharma increases.
Novartis itself hasn't escaped the spotlight, with The Wall Street Journal pointing out in October that wholesale prices for a year's supply of cancer-fighter Gleevec doubled at the end of 2014.
The Swiss pharma is acting accordingly. On Wednesday, it said it would be centralizing some of its R&D and manufacturing functions in a drive to save $1 billion by 2020--a move Jimenez says will help the company keep its prices down.
"We have to exist no matter what the pricing environment is going to look like," Jimenez said. "Novartis is taking decisive action so that over the next few years we will be able to lower our cost base and still invest in R&D, which is really the lifeblood of this industry."
Novartis has gotten out ahead of many of its rivals when it comes to adapting to the pricing landscape. Soaring drug costs have prompted a payer crackdown, and to placate them, the drugmaker has offered a pay-for-performance scheme for its new heart failure med Entresto.
"The market is crying for high-quality pharma products at a lower price," company pharma chief David Epstein told investors Wednesday on the company's Q4 conference call. "That's one reason we're turning to outcomes deals."
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