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Novartis chief sees lasting price pressure as the new reality

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(Bloomberg) — Novartis AG (NYSE:NVS) Chief Executive Officer Joe Jimenez figures the golden days of unfettered price increases are over in the U.S.

The soaring cost of some medicines has sparked a controversy that’s hampered drugmakers’ ability to raise prices in their biggest and most profitable market.

“Those days are over,” Jimenez said in a Bloomberg Television interview with Manus Cranny. “You have to assume that there is going to be increased price pressure in the U.S.”

The shift Jimenez describes comes after months of debate — and regulatory scrutiny — over the cost of some drugs such as the heart medicines Nitropress and Isuprel, whose prices soared 212 percent and 525 percent respectively after Valeant Pharmaceuticals International Inc. acquired the rights to sell them.

Novartis, the maker of the blockbuster cancer drug Gleevec, is responding to the expected pressure by pooling its manufacturing operations to cut costs, according to Jimenez.

“We have to exist no matter what the pricing environment is going to look like,” he said. “Novartis is taking decisive action so that over the next few years we will be able to lower our cost base and still invest in R&D, which is really the lifeblood of this industry.”

See also: View: Lower health care spending doesn’t fix everything

The Basel, Switzerland-based company reported fourth-quarter profit that missed analysts’ estimates on Wednesday, hampered by a slump at its eye-care unit Alcon. The stock fell as much as 3.9 percent, the steepest drop in more than four months, in Zurich trading.

—With assistance from Ed Ludlow and Johannes Koch.

See also:

Novartis to work with Amgen on Alzheimer’s and migraine drugs

Novartis CEO says U.S. insurance M&A to crimp drug prices


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