Top Novartis brass backs results-based drug pricing

Joerg Reinhardt

Novartis ($NVS) CEO Joe Jimenez and Chairman Joerg Reinhardt sang the same tune on drug prices in separate interviews over the weekend, backing performance-based drug deals while pointing the finger at other healthcare expenses for driving up overall spending.

"This will evolve in the next 5-10 years," Reinhardt told the Swiss newspaper Tages-Anzeiger, saying the system will move toward paying for results rather than individual tests and treatments. "If [the] patient does not feel better, [the system] will not pay," he said.

Reinhardt cited one pay-for-results program in Germany covering Novartis' asthma drug Xolair as an example. Patients with severe allergic asthma get Xolair, and if they have not responded within 6 months, Novartis pays back the cost.

Jimenez said the idea should be applied more broadly. Companies can't expect to be rewarded for drugs that deliver marginal benefits and little improvement over older treatments. "If medicines do not have an effect then those medicines deserve not to be reimbursed," Jimenez told the Financial Times as he takes over as president of the European Federation of Pharmaceutical Industries and Associations (EfPIA). "That's going to happen with or without us so we'd rather be part of the solution."

Novartis CEO Joe Jimenez

But both men quickly turned to other healthcare expenses as bigger contributors to rising costs. Politicians see drugs as a "soft target" for budget cuts, Jimenez told the FT. Pharma only accounts for 15% of European healthcare spending, Jimenez said--Reinhardt quoted 10%--and yet drug prices get a big share of public attention. There are better opportunities for cost-cutting, both said.

CT scans are prescribed too often, Reinhardt pointed out. And too often, doctors and hospitals use several diagnostic procedures when just one will do, and it's self-interest at work, he said. "The patient is sent here, sent there because the hospitals have to utilize their devices," he said. Predictably, Jimenez agreed: "There is a tremendous amount of waste in the system and if you focus on just those inputs that deliver and eliminate those that don't then we can put these health systems on a sustainable path."

Meanwhile, drug prices continue to make headlines, Reinhardt acknowledged, with prices continuing to rise in some areas, particularly cancer. But confidential discounts cut actual drug costs in the U.S., he contended, and in Switzerland, the average price level for drugs has dropped over the past three years. Globally, Novartis expects stable or declining prices, he said. With one exception, Reinhardt said: "[O]nly in the U.S. the prices will remain higher even in the long run."

- get the Tages-Anzeiger piece
- read the FT story

Special Reports: Top 15 pharma companies by 2014 revenue - Novartis | Top 15 highest-paid biopharma CEOs of 2013 - Joe Jimenez, Novartis