Novo sees harder times ahead as payers purge drugs from formularies

Payers in the U.S. have learned to pit drugmaker against drugmaker to extract discounts, and they are using the practice to good effect in the diabetes space. That may be good news for patients, but it's taking a toll on drugmakers. Just ask Novo Nordisk.  

The Danish drugmaker today reported better sales of key products, better sales in China and even sales growth in the U.S. But with the market in the U.S. getting rough--it lost a major contract for its NovoLog long-acting insulin--it has lowered its sales and profit forecasts for the year.

Novo now expects sales growth of 5% to 7% and its projected profit growth of 5% to 8%. It earlier expected its profit could grow by as much as 9%.

“In the U.S., the market environment is becoming increasingly challenging and contract negotiations for 2017 have reflected an intensifying price competition,” Novo CEO Lars Rebien Sørensen said in a statement.

The quarterly numbers did not reflect the pain it sees going forward. Sales in the U.S. were up 7%, and outside the U.S., they grew 11%. On Friday, Novo reported second-quarter revenue of 27.49 billion kroner ($4.17 billion), which missed analyst expectations. It reported earnings of $1.51 billion, or 60 cents a share. Sales of two key drugs Victoza and Tresiba both grew. In Q2, Novo reported sales of 4.95 billion kroner ($742 million) for Victoza, which fell slightly short of analyst projections of 5.02 billion kroner, Bloomberg said.

But that all belies harder times. The difficulty in the market for those companies like Novo, Sanofi and Eli Lilly that derive big sales from diabetes drugs was illustrated starkly this week when payer Express Scripts announced its 2017 formulary and left Novo’s Victoza off. CVS dropped Sanofi’s Lantus, the world’s best-selling diabetes drug which will be replaced by the biosimilar Basaglar from Eli Lilly and Boehringer Ingelheim.

The company said that with most of the formulary negotiations complete, net prices for the diabetes portfolio in 2017 is expected to be “moderately lower” compared with this year. But execs were adamant that with new innovative products coming on line there is still room for Novo, which controls nearly half of the global diabetes market, to grow worldwide sales  over the next few years.

Sørensen said he particularly expects growth from the insulin Tresiba and diabetes medicine Victoza. The company is expecting to get a label change on Tresiba that should help it with price negotiations next year.

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