|Novartis CEO Joe Jimenez|
Worried that health insurers' urge to merge will put even more pressure on your prices? You're in good company. Novartis ($NVS) CEO Joe Jimenez agrees.
For years, pricing freedom in the U.S. has allowed drugmakers to set prices higher than in other countries and raise them along the way. The tactics help offset budget pressures overseas and can drive sales growth for meds on the decline.
Not so much anymore, Jimenez told Bloomberg. As anyone who keeps an eye on pharma trends knows, U.S. payers are increasingly restive. From newly restrictive formularies to demands for discounts, insurers and pharmacy benefits managers are squeezing drugmakers more than ever.
"Across the board in the U.S., the pricing environment is more difficult," Jimenez told the news service. "With a consolidated payer base as well as consolidated providers, you have to assume going forward that price increases in the U.S. are going to be quite limited."
Earlier this month, Moody's Investors Service analysts warned of the same dangers. Aetna ($AET) buying Humana ($HUM)--and other proposed mergers--would be bad for drugmakers, the analysts said, as market share gains ratchet up reimbursement pressures. The consolidation is likely to cut some product sales and put a damper on pricing for others.
As one example of how Novartis is trying to navigate the new payer landscape, the Swiss drugmaker designed its late-stage studies for the heart failure drug Entresto to deliver the kind of outcomes data that could impress payers. The drug successfully prolonged patients' lives and staved off hospitalizations, giving Novartis ammo for its negotiations with PBMs and health plans.
Plus, the drugmaker says it's proposing some pay-for-performance plans to payers, which would allow for lower upfront payments for the drug, supplemented with bonuses down the road if Entresto does keep patients out of the hospital (and free of the big bills hospital stays would generate).
Jimenez figures that this sort of pricing arrangement will become common eventually. There's a scattering of pay-for-results arrangements in the marketplace these days, and more are in the discussion phase; for instance, some industry experts have proposed tying the prices of cancer meds to their relative results in different indications. And the American Society of Clinical Oncology recently proposed a drug scorecard that would rate treatment effectiveness in various indications and highlight cost as one decision-making factor. In the meantime, garden-variety pricing pressures aren't going away.
- read the Bloomberg story
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