(Bloomberg) — Novartis A.G. (NYSE:NVS) Chief Executive Officer Joe Jimenez said the consolidation spree among U.S. health insurers is making it harder for drugmakers to increase prices in a market that has for years been a primary driver of growth for the pharmaceutical industry.
“Across the board in the U.S., the pricing environment is more difficult,” Jimenez said in a phone interview Tuesday. “With a consolidated payer base as well as consolidated providers, you have to assume going forward that price increases in the U.S. are going to be quite limited.”
Aetna Inc. (NYSE:AET) agreed this month to buy rival health insurer Humana Inc. for about $37 billion, after Centene Corp. (NYSE:CNC) agreed to pay $6.8 billion for Health Net Inc. (NYSE:HNT), including debt. The Patient Protection and Affordable Care Act of 2010 (PPACA) has spurred deals by introducing rules that push insurers to look for savings, and by creating millions of new customers.
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In response, drugmakers will need to show they’re providing innovative therapies that will save insurers money by keeping patients out of the hospital, Jimenez said.
Novartis this month won U.S. approval for Entresto, a heart-failure medicine that the company says will become its biggest seller with revenue in excess of $5 billion. While the drug’s price, at about $4,500 a year, is higher than some analysts predicted, the company hasn’t had pushback from payers because it can prevent hospital stays that cost an average of $11,000, Jimenez said.