Moody's takes pharma outlook down a notch on U.S. pricing pressure

The U.S. pricing pressure on pharma right now is here to stay, Moody's predicts--and the ratings firm is tweaking its outlook for the industry because of that assessment.

Moody's is taking its outlook down a notch, from "positive" to "stable," it said Thursday. It now forecasts 3% to 4% EBITDA growth over the next 12 to 18 months, down from the 4% to 5% it predicted previously.

The move may come as no surprise to industry watchers who have been tracking the recent hullabaloo surrounding drug pricing. Payers, patients and even doctors have taken matters into their own hands, searching for creative ways to cut down on soaring costs. And more recently, Congress and presidential candidates have jumped into the fray, putting the heat on price-hikers Valeant ($VRX) and former Turing CEO Martin Shkreli.

GSK CEO Andrew Witty

Some pharma CEOs have been open about the situation--and they've worked to position their businesses accordingly. GlaxoSmithKline's ($GSK) Andrew Witty, for one, has bulked up in vaccines and consumer health, two traditionally low-margin businesses that aren't subject to the payer wrath that's wrecked sales of blockbuster Advair. And Novartis ($NVS) chief Joe Jimenez recently remarked that the days of flexible pricing in the U.S. "are over," noting that "you have to assume that there is going to be increased price pressure."

There are other reasons for the Moody's change of heart, too. The negative impact of the rising U.S. dollar is taking a toll on overseas profits of U.S. based companies, it said, and slow uptake of some new products is dragging things down, too--though to a lesser extent.

But its new opinion isn't set in stone. "We could change our outlook to positive … if pricing flexibility increases, if new product launches significantly exceed expectations, or if a new round of industry mega-mergers creates large cost reduction opportunities," it wrote. But on the flip side? It could take its outlook down another peg if sales of new products disappoint or biosimilars take a bigger bite out of drugmakers' top lines than expected.

- read the release

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