Novo Nordisk, Roche see outsized threats from U.S. drug pricing talks: analysts

While Congress and the U.S. government have sought to lower drug prices for years, the issue appears to be coming to a head once again in Washington, D.C. The proposals that officials are eyeing aren’t new, but they could have outsized effects on some of the industry's largest players.

Analyzing the potential effects of drug pricing reform for European big pharma companies including AstraZeneca, Novartis and Sanofi, the team of analysts at ODDO BHF thinks Roche and Novo Nordisk stand to lose the most under the pricing proposals being discussed.

Last week, the Department of Health and Human Services (HHS) released a plan aimed at tackling high drug prices in the U.S. by allowing Medicare price negotiations plus measures to improve competition and new public-private partnerships focused on research. U.S. drug prices are significantly higher than foreign prices, the agency notes, and allowing Medicare to negotiate is "key to lowering out-of-pocket costs for consumers, governments and total drug spending," the plan (PDF) states.

Among the large European drugmakers the ODDO team covers, Novo Nordisk and Roche get the biggest proportion of their sales from the U.S.' government insurance system. That means those companies could be the most exposed among the drugmakers.

For diabetes specialist Novo, 14% of the company's overall sales come from Medicare Part D, the analysts estimate. As for cancer bigwig Roche, the analysts say that 12% of its sales come from Medicare Part B, which covers physician-administered drugs.

RELATED: HHS aims to use value-based care payment models to lower drug prices

The latest round of pricing talks comes after years of discussion in D.C. Former President Donald Trump and his administration tried several strategies to lower prices during his term, but those efforts ran into various setbacks, and prices have continued rising along the way.

While there seems to be momentum on the issue now, it's not certain pricing reform will happen, the ODDO BHF analysts point out. Medicare pricing negotiations are a "flagship measure" discussed during the recent presidential campaigns, but it's "one of the most debated and contested [proposals] by both Republicans and some Democrats." The analysts think there's a "very low" chance the proposal will come to pass.

But if Medicare pricing negotiations do become a reality, the analysts said there's a risk it could spread to the commercial insurance system.

RELATED: With sweeping executive order, Biden puts drug pricing, anti-competitive strategies in the crosshairs

Before last week's HHS drug pricing plan, President Joe Biden in July issued an executive order calling on the agency to publish a plan to tackle drug prices, including by exploring Medicare price negotiations, importation and more. While that was the clearest drug-pricing signal from the White House at the time, Andrew Lacy, a partner in Goodwin’s antitrust and competition practice, said via email that the "wish list" of policy goals may not become reality.