Pharma execs lament European price cuts

One of the themes emerging from this round of pharma earnings reports is Europe--specifically, its price-cutting and cost-saving push and how it's likely to affect sales on the continent going forward. And the news is not positive.

Several drug executives used their earnings calls to warn that austerity measures in Europe will hurt--worse during the second half of this year than in the first half, and even worse next year. "We've seen some price pressure in the first half," GlaxoSmithKline CEO Andrew Witty (photo) said, as quoted by Reuters. "It will accelerate as we move through the second half and actually I think it will be more of a 2011 phenomenon." He predicted that, on average, European prices will drop by more than 3 percent over the next 18 months, and perhaps more. "Whether it is going to be a lot more than three is still a little premature to call," he said.

Johnson & Johnson went so far as to put an actual dollar amount on the suffering: $200 million for 2010. CFO Dominic Caruso said "the incremental pricing pressure" looks as if it will have an annualized impact of "mid-single digits" to J&J's European business. Novartis, meanwhile, saw a 3.1 percent impact from price cuts during the first half and expects a bigger hit during the second. "It would not be unreasonable to estimate that the impact could be as much as twice what we saw in the first half," pharma chief David Epstein said.

Given that the cuts keep coming--Italy just announced new measures to save money with generics--we'll be hearing more about European pricing pressures for many months to come.

- read the Reuters piece

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