[ad_1]
The United States is one of the last countries where drug prices are not dictated by the state. But now they have reached such a level that Republicans and Democrats want to intervene. In the case of government price controls, Roche would have a lot to lose up front.
Roche is carrying out major construction projects at its Basel headquarters. The drug company can afford it thanks to the burgeoning American business.
Be it drugs, hospital treatment or preventive measures: in times of a pandemic, there is a growing demand for health services. Stocks in pharmaceutical companies have not been among the big winners this year. In the case of the two Swiss heavyweights Novartis and Roche, by contrast, you can tell that they have been moving sideways for months.
Nervousness at corporate headquarters
Currently, investors seem to want to wait and see rather than risk getting involved. Rightly so, say several market watchers. They believe that the pharmaceutical industry, which has long been ruined with high profit margins, must prepare for more difficult times. Investment strategists are particularly concerned about the business outlook in the U.S. They fear that after the presidential and congressional elections, drugmakers will come under increasing price pressure, regardless of whether Republicans or Democrats will participate in the race.
There is also a great deal of nervousness at the Roche and Novartis corporate headquarters. Both companies do not want to speculate on the outcome of the on-demand elections. However, his remarks, already released by the Trump administration, leave no doubt that there is a high level of concern about attempts to cap drug prices and, in some cases, even more radical reform proposals by governments. Democrats.
According to the international industry association IFPMA, the US accounts for more than 40% of global drug manufacturers’ sales. This makes the country by far the largest sales market. The American business is also of vital importance to Roche and Novartis.
In the case of Roche, the weight of the US has increased considerably in recent years. The company owed about 55% of sales of CHF 48.5 billion to US stores in its pharmaceutical division in 2019. In 2009, the corresponding share was just 38%. Novartis only breaks down sales by region across the group. Consequently, the United States’ share has only increased from 32% to 34% since 2009. In the pharmaceutical division (Innovative Medicines), which contributes the majority of revenue, the weight of the US sales market is likely to be significantly higher.
The notably greater importance of the US is also reflected in the Swiss export statistics. In 2009, the US sales market only accounted for 7.3 billion Swiss francs or about 11% of the total volume of 66.1 billion Swiss francs in the category of final chemicals, including active ingredients, relevant to the pharmaceutical industry. However, last year, exports to the United States amounted to 25.5 billion Swiss francs, many times their value at the time. They now account for almost a quarter of all Swiss exports of pharmaceutical products.
The multinational pharmaceutical companies Roche and Novartis are at the forefront of Swiss exporters mainly thanks to their facilities for the production of biotech drugs. The two highly innovative companies have benefited significantly from the willingness of the US market to accept novel therapies in recent years.
Confusing pricing structure
Also, like other pharmaceutical manufacturers, they had the advantage that drug prices in the United States were basically freely negotiable. Unlike almost everyone else in the world, the government or an individual authority does not determine how much a drug can cost. Rather, price negotiations are conducted with various parts of the private sector, including primarily health insurers and purchasing organizations (so-called pharmacy benefit managers), under the mandate of health insurers.
Probably the biggest advantage of this decentralized system for the pharmaceutical industry is that newly developed drugs tend to reach market much faster than in other regions of the world. In Europe, drug manufacturers often have to be very patient in difficult negotiations with national health authorities about reimbursement. Due to the large number of players, the pricing structure in the US is also very confusing. Those involved know how to use this to their advantage and are phasing out more and more drugs from year to year by imposing annual price increases, some of which are well above the rate of inflation. In Europe or Japan it works exactly the other way around: there, governments force drug manufacturers to regularly reduce the price of existing products.
Novartis in the pillory
The aggressive approach of many pharmaceutical companies in the United States is exemplified by the drug Humira, which is now the best-selling drug in the world. The list price (excluding discounts) for this product, which was first approved by the FDA in late 2002 (for rheumatoid arthritis), increased by another 7 by 2020, according to an article in the Journal of the American Medical. Association (Jama), 4%, this after the US manufacturer Abbvie had already implemented a total increase of 19.1% in 2018 and 2019. Last year, Abbvie’s global sales for this product were almost $ 15 thousand millions.
Novartis has also made huge profits from price increases for a featured product. As noted by a committee of the United States House of Representatives in a recently published report on the cancer drug Glivec, which is now also available as a generic, the drug company increased the price no less than 22 times after its launch in 2003. The consequence of this was that the costs of an annual administration increased from initially $ 25,000 to $ 123,000.
The Novartis plant in Stein, Aargau, plays a central role in the company’s Swiss exports.
Canada imports?
Faced with such price increases, representatives of both political camps have promised not to sit idly by any longer. For the past four years, President Trump has been furious at the high spending Americans would have to face on drugs. He has also announced several attempts to contain costs, although much, as so often in his previous term, has remained in rhetoric. It was only in the middle of last month that it launched its latest initiative, which aims to bring the prices of injected drugs in favor of those insured in the state Medicare fund (open to all Americans over 65) to the lowest level in the countries. of the OECD.
Trump has also campaigned for individual states to be allowed in the future to import drugs from Canada. In the much more government-run Canadian healthcare system, drug prices are lower than in the United States. However, the government of Canada resists the planned unilateral action of the neighboring state. He fears that parallel US imports will significantly increase overall demand for drugs in Canada, and thus also have a price-driving effect on business with Canadian patients.
Roche paints black
The club that Democrats are willing to make in the fight to lower drug prices could further affect the pharmaceutical industry. The opposition party has proposed authorizing Medicare, following the European model, to negotiate prices directly with pharmaceutical companies. Plus, you have a federal voluntary insurance solution for all Americans. According to analysts, this could mean that the US would also receive a central state organization for the purchase of drugs.
Roche and Novartis are equally against state control of drug prices. Both companies argue that American patients should fear losing their preferred access to modern therapies. According to Roche estimates, “devastating effects on the US economy” could also be expected, as pharmaceutical companies would likely spend significantly less on research and development in the United States. The group’s press office writes in an undisguised menacing tone that “more than 700,000 jobs could be permanently lost across the United States.”
It remains to be seen whether the future administration is prepared to accept such a risk. In the run-up to the US presidential elections, the pharmaceutical industry had been promised all kinds of interventions. Little has happened to this day.
