Vasella: Gov't bailouts will hurt pharma

Just in case you cling to a shred of hope about pharma's abililty to weather the recession, Novartis CEO Daniel Vasella (photo [1]) is here to help. The downturn is going to hit drugmakers where it hurts most, he says: in the margins.

The sometimes-outspoken executive told his shareholders at their annual meeting that he's expecting pricing pressure to get even more intense. With governments spending untold billions on bailouts--of banks, automakers and who knows who else--they'll be looking to cut costs elsewhere. Indeed, President Obama has promised to cut the U.S. deficit by half during his term.

Those cuts will come at least in part from drug-price cuts, Vasella predicts. Governments and insurers will try to control their costs by putting the squeeze on drugmakers to lower their prices. So while pharma shares might be a defensive play for equity investors, pharma companies won't be immune to the economy's downward spiral, he says.

- read the Dow Jones story [2]

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