Easing U.S. drug spending gives Sanofi, Novo room to raise insulin prices

With generics flooding the market, U.S. drug spending fell by about 2% last year. That took pressure off of health insurers and left room for drug price hikes by those companies with drugs in demand, like insulin. Novo Nordisk ($NVO) is one of those companies.

Novo Chief Operating Officer Kåre Schultz explained it this way during an analyst call last week: "(T)he cost pressure on managed care and the government and other institutions that are paying for pharmaceuticals is reduced. And that means those products that are of high value and that are protected in one way or another, they have the opportunity to take price increases without sort of messing up the whole system."

And so Novo bumped up U.S. prices 10% on Levemir and 8% on Victoza in the second quarter, spokesman Mike Rulis told Bloomberg. Novo reported improved Victoza sales in the second quarter as well, which in turn helped it achieve a 25% jump in revenues overall.

But Novo was not alone. CFO Jesper Brandgaard told analysts that Novo learned last week that rival Sanofi ($SNY) was taking another price hike this month on market leader Lantus.

Sanofi spokesman Jack Cox confirmed that was true. Sanofi had taken a 10% increase on Lantus vials and Lantus SoloSTAR injection pens in April. It followed that up with another bump this month, Cox said. "Yes, the list price for Lantus vials increased by 14.9% to $16.64 per ml and Lantus SoloSTAR increased 9.9% to $18.38 per ml," Cox said in an email.

Cox said the company does not publicly discuss the specifics of pricing strategy, but he did say it factors in both medical value of a drug and market conditions when setting U.S. prices. He emphasized that the final price U.S. consumers will pay is determined by a number of factors, such as their health insurance coverage.

Drugmakers are always evaluating the market, looking at competitive prices and potential competition from generics, seeing where they might improve margins. Sanofi took the two price hikes on Lantus after the FDA squelched the near-term hopes of approval of Novo Nordisk's Tresiba, which looked like it could give Lantus a run for its money. Eli Lilly ($LLY) and Boehringer Ingelheim have a drug candidate that is believed to be a potential challenger to Lantus' $6.6 billion market dominance. The two might be ready to seek approval on it next year. Lilly also is working on a biosimilar that could pose a threat. For its part, Sanofi released data in June on a new and improved version of Lantus. The French drugmaker is expected to seek approval for it in the first half of next year.

- read the Bloomberg story
- here's a transcript of the earnings call from Seeking Alpha (reg. req.)