novartisCEOs warned Tuesday that U.S. drug pricing policy under President Donald Trump creates a “very difficult situation” and that reality will soon set in for both drugmakers and patients.
“The long-term effects are significant,” CEO Vas Narasimhan told CNBC’s Caroline Roth. “The reality of MFN is going to emerge in the next 18 months.”
Novartis is focused on quickly changing the way European and Japanese governments reward innovation, he said, adding that if that does not happen, new medicines may be delayed from entering these markets and patients may not be able to access the medicines.
The most favored nation drug pricing policy, or MFN, implemented by Trump last year means prices in the large and lucrative US market are linked to prices in comparably wealthy countries. Trump prioritizes low drug prices for Americans and has done so for a long time criticized What he calls “foreign nations freeloading on American-funded innovation.”
Narasimhan’s comments echo those of other drugmakers who have lamented Europe’s fragmented markets, red tape and pricing policies.
Roche And AstraZeneca are among the companies that have recently flagged European countries risk missing out on new medicines unless they address low drug spending and counterproductive policies.
Narasimhan told CNBC that the impact of MFN on Novartis’ top and bottom line is still limited as it currently impacts about 5-10% of sales in the Medicaid segment.
He said although there are “good early discussions” with European governments, not enough action is yet being taken. “The awareness is there, but I still don’t realize the level of impact that will come.”
Earlier this month, Germany announced proposals to cut costs in its national health system to deal with a looming funding shortfall of billions of euros, including steep discounts on off-patent medicines.
“For example, we’ve seen recent steps by the German government that really go in the wrong direction. And so that’s very worrying,” Narasimhan said.
“These governments have to take this seriously now, because the (MFN) policy is set, and I don’t think it will disappear in the United States.”
