No raise for Sanofi CEO: Brandicourt’s 2018 pay slashed by 25% as sales fall short

Brandicourt, one of seven pharma executives called before the Senate to justify high drug prices, tried to convince lawmakers that Sanofi isn't reaping riches off diabetes patients who can't afford insulin. (C-SPAN)

Pharma CEO compensation packages can seem oddly generous when the companies themselves are struggling. Witness AstraZeneca and Celgene, which hiked their CEO’s pay by 9% and 23% respectively in 2018. But that was most definitely not the case for Olivier Brandicourt, CEO of Sanofi.

Brandicourt’s total compensation actually fell in 2018, as the company suffered major sales declines in its flagship diabetes unit. The CEO’s pay package was slashed by 25% in 2018 to €7.28 million ($8.2 million), according to a new SEC filing.

Sanofi kept Brandicourt’s fixed salary flat at €1.2 million ($1.4 million), and the value of his stock options and performance shares took a beating. Those awards were down 48% and 31% respectively year over year.

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The problem was that the company missed its target on one key financial objective: sales. Net revenues for the year fell nearly 2% to €34.5 billion ($38.9 billion). Diabetes stalwarts Lantus and Toujeo suffered from net-price declines and Medicare coverage overhauls. In the fourth quarter alone, sales of Lantus dropped 20%, while Toujeo plummeted 29%.

RELATED: Sanofi, buoyed by Dupixent and rare disease drugs, expects a brighter 2019

Pricing didn't help, either. Sanofi actually raised its list prices on nearly half its products by an average of 4.6% in 2018, but the rebates it paid to insurers amounted to 55% of gross sales. That explains why its net prices fell 8% last year.

Brandicourt’s pay cut comes amid heightened scrutiny in Washington over drug pricing. Insulin makers in particular have been hit hard. Sanofi, Eli Lilly and Novo Nordisk are being investigated by two Democratic U.S. representatives who are questioning rising insulin pricing, and Rep. Peter Welch has introduced legislation that would make it legal to import low-cost insulin from Canada.

Brandicourt was one of seven Big Pharma executives summoned by the Senate Financing Committee in late February—and he arrived armed with data suggesting that Sanofi is not reaping the riches off of diabetes patients that lawmakers think it is. The average net price of Lantus dropped nearly 30% since 2012, he said in written testimony (PDF). But the average out-of-pocket cost for patients has risen 60% over that time.

“In this case, not only are discounts apparently not being passed on to patients, but patients are in fact being asked to pay more when PBMs and health plans are paying less for the medicine,” Brandicourt wrote. “This situation defies logic and should not happen.”

RELATED: Big Pharma grilled on the Hill: International pricing, AbbVie CEO's bonus and bye-bye rebates

Grappling with the ongoing insulin-pricing probes may be the least of the challenges Brandicourt is facing, though. Much of his compensation is based on “operational transformation,” as Sanofi has been working to streamline its business operations and narrow its pipeline focus in an ongoing effort to find high-value revenue streams beyond diabetes. To that end, it has invested heavily in oncology and rare blood disorders, and it recently culled 38 projects from its pipeline that it deemed to be less promising.

Brandicourt is looking forward to a brighter 2019, he said during Sanofi’s fourth-quarter earnings report. One of the highlights, he predicted, could be Dupixent, its asthma drug that just picked up a new FDA approval to treat adolescents with atopic dermatitis.

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