Switzerland wants to slash drug prices? Not so fast, say Novartis and Roche

So much for home field advantage. Switzerland plans to put the squeeze on drug prices, despite its corporate citizens Roche ($RHHBY) and Novartis ($NVS). And the Basel-based companies are none too happy about the idea.

As Reuters reports, Switzerland's health ministry proposes to change its drug-pricing plan beginning in 2015. According to a Swiss pharma trade group, Vereinigung Pharmafirmen in der Sweiz (Vips), the ministry wants to slash prices to levels below those in "economically comparable" European countries.

That's not acceptable, Vips said as soon as the proposals first surfaced this summer. The group used the usual arguments--the cuts would stifle innovation, stall new drug launches, hamper patients' access to meds and so on. Vips also contends that lower prices in Switzerland could trigger a reference-pricing cascade around the region--another typical industry argument against price cuts.

But the group also dug into Swiss macroeconomics. Namely, the fact that two of the country's biggest employers are pharma heavyweights with big employment rosters and big exports. Plus, these companies are already battling the strong Swiss franc, and put up with Switzerland's higher wages and other costs.

"The result would be a marked weakening of pharmaceutical companies operating in Switzerland, which would have a strong negative effect on their future contributions to the country's economy and employment," Vips said in a statement.

It's not the first time in recent years that the Swiss government has cracked down on drug prices; like other European countries, Switzerland has been keeping a hawkish eye on healthcare spending. The government and drugmakers struck its current pricing deal last year. But Swiss drugs still cost about 5% more, on average, than they do in other top European markets.

Christoph Franz

Here's one example of the danger, though. As Reuters notes, Switzerland recently said it would pay Roche for its new cancer drug Perjeta--but at a 20% discount to prices in other European countries. Roche refused the offer. So, the government yanked Perjeta from its basic formulary.

If Roche would have accepted the discount, that would have set a dangerous precedent, Chairman Christoph Franz said in a recent interview with a Swiss newspaper. "You have to question whether we should give out our medicines in our home market for a price that is 20-30% cheaper than in the neighboring E.U.," he told the BaslerZeitung (as quoted by Reuters). "It's obvious that we can't do this from the signal it would send alone."

- read the statement from Vips (PDF)
- get more from Reuters

Special Report: Top 10 pharma companies by 2013 revenue - Novartis - Roche

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