Vasella: Gov't bailouts will hurt pharma

Just in case you cling to a shred of hope about pharma's abililty to weather the recession, Novartis CEO Daniel Vasella (photo) is here to help. The downturn is going to hit drugmakers where it hurts most, he says: in the margins.

The sometimes-outspoken executive told his shareholders at their annual meeting that he's expecting pricing pressure to get even more intense. With governments spending untold billions on bailouts--of banks, automakers and who knows who else--they'll be looking to cut costs elsewhere. Indeed, President Obama has promised to cut the U.S. deficit by half during his term.

Those cuts will come at least in part from drug-price cuts, Vasella predicts. Governments and insurers will try to control their costs by putting the squeeze on drugmakers to lower their prices. So while pharma shares might be a defensive play for equity investors, pharma companies won't be immune to the economy's downward spiral, he says.

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