Novartis CEO Jimenez says China is a difficult market, but worth it

Joseph Jimenez

China is a huge market and offers huge potential for pharma. But it is an increasingly challenging place to do business for Western drugmakers, as GlaxoSmithKline's ($GSK) run-in with authorities over bribery allegations starkly illustrates. Novartis ($NVS) CEO Joseph Jimenez acknowledged to the China Daily that the country is not an easy place to do business, but said it was too important for Novartis not to put effort there.

"The role China is playing is top-line growth for Novartis," Jimenez told the newspaper in a wide-ranging interview. "It helps us see the fruit of our R&D investments we have made in many of our pipeline products." The Novartis leader said the company's sales in China were up 24% there even as the loss of its blockbuster heard drug Diovan rendered sales around the world flat. He expects China will return strong double-digit growth for pharma and that Novartis "could grow slightly faster than the market."

China's effort to bring universal healthcare to its 1.3 billion people is what will drive that growth, but as Jimenez points out, China, like all countries, is looking for ways to cut swelling healthcare costs. "Governments around the world are lowering the prices of pharmaceuticals and China is no exception," Jimenez said. The Swiss drugmaker is facing that fact by pushing generics through its Sandoz division while still developing new, innovative drugs.

Experts on the Chinese system say drugmakers are going to find authorities pressuring them further to cut prices so more people can benefit from the best drugs the country can get it hands on. It has already expanded its list of price-controlled drugs, and just last week authorities said they were looking at the pricing by 60 drugmakers to evaluate how much China should pay for their products. It also has launched a criminal probe into allegations that GSK employees were bribing healthcare providers to sell more drugs, allegations the company has denied, in a move that is not going unnoticed by all drugmakers doing business there.

Novartis is learning how to wheel-and-deal in the realm; reportedly cutting a deal in the Jiangsu province that entails giving the government three doses of the pricey cancer treatment Gleevec for each dose the province buys. That reduces the cost to about $12,000 a dose, compared to the wholesale price for Gleevec in the U.S. of about $77,000. The approach also keeps the drug from being referenced by other governments looking to cut prices.

Jimenez is also backing his belief in China with investments. The drugmaker is putting out $1 billion to build an R&D center in Shanghai.

- read the China Daily story