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 In an interview with Reuters in New York on Wednesday Narasimhan, a
42-year-old U.S. doctor who has headed the Swiss drugmaker since
Feb. 2018, threw his support behind a U.S. government proposal to
end a system of rebates drugmakers pay to pharmacy benefit managers
(PBMs) and health insurers in order to get products on their lists
of covered medicines..
"We (Novartis) pay almost 50 percent of our gross revenues in the
United States into rebates," Narasimhan said. "If you return those
rebates to patients, so patients pay less out of pocket, I think
that is something that makes a lot of sense and will correct a
distortion in the marketplace."
In his State of the Union speech this week, U.S. President Donald
Trump complained again that Americans pay more for drugs than people
elsewhere. Narasimhan, who has labeled as "destructive" efforts to
link U.S. prices to those in other countries, countered that this is
only partially true.
"There are situations where prices in the U.S. are certainly higher
than the prices in Europe, but there are many situations, as well,
where they are very comparable," he said. "It's difficult to make
blanket statements, like this is always happening."
Some analyses, including one commissioned by Reuters in 2015, showed
that U.S. prices for the top-20 selling medicines were three times
higher than in Britain. [https://reut.rs/2TyAN08]
Narasimhan acknowledged the industry and company reputational
challenges stemming from anger over high prices, kickback scandals
and last year's revelation that Novartis paid Trump's former
attorney, Michael Cohen, $1.2 million.
He said drugmakers, in some instances, boosted prices excessively or
fell short on providing access and now had work ahead to regain the
standing they once had, as the industry brought scientific advances
like vaccines that saved billions of lives.
"I would say, over the last 20 years, because of behaviors that the
industry had - I would call them outlier events, (but) it's hard to
call them outlier events, when there's enough of the outlier events
- damaged the industry's reputation," Narasimhan said.
"At least at Novartis, I think of it as the great journey of my time
as CEO to try to get back to a different place from a reputation
standpoint."
Last month, U.S. Health and Human Services Secretary Alex Azar
announced a plan that would end rebates now paid to PBMs and others
and instead pass along savings to consumers covered by U.S.
government health plans. Trump, in his State of the Union address on
Tuesday, again called for lower U.S. prescription drug prices.
PBMs, which administer drug benefits for employers and health plans,
argue that they are passing sufficient savings to patients and
contend that rebates help keep down insurance premiums.
Narasimhan, echoing arguments of many large drugmakers, said the
existing system obscures the true price of drugs and leaves patients
on the hook, in the form of higher co-pays, or co-insurance
payments.
'ZERO TRANSPARENCY'
He noted that changes in the decades-old rebate system could
eventually affect insurance plans offered by U.S. employers,
potentially leading to premium hikes.
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"We have zero transparency into the billions we pay in rebates," the
Novartis CEO said. "You could see some adjustment in premiums. But I
think that's another area where we should get transparency."
Novartis, which had 2018 global sales of $51.9 billion and net
profit of $12.6 billion, gets more than a third of its revenue in
the United States. But despite all the talk about rising list
prices, Narasimhan said since 2016 net prices for its prescription
drugs fell about 1 percent.
"At Novartis, we no longer see net price growth as a meaningful
contributor," he said.
Instead, the company is counting on recent and upcoming launches of
new drugs to fuel 2019 growth of 4 percent to 6 percent, a forecast
Narasimhan reiterated on Wednesday.
Since his elevation to CEO last year, Narasimhan sold off
over-the-counter and generic drugs units and plans to spin off the
Alcon eyecare business before July as he focuses on new, often very
pricey transformative treatments.
These include a gene therapy for spinal muscular atrophy, a one-time
treatment Novartis has said could be cost-effective at up to $5
million per patient, and Kymriah, a CAR-T cell cancer immunotherapy
with a list price of $475,000.
Narasimhan said the extensive reliance on direct-to-consumer
television advertising for medicines in the United States, a
practice in which Novartis engages, may also be hurting the
industry's image. TV ads for prescription drugs are not allowed in
most countries.
"Our use of the television and television media has eroded some of
the trust in the fact that we're a science-based industry,"
Narasimhan said.
Some image problems, however, are specific to Novartis.
Since 2015, it has paid hundreds of millions of dollars in
settlements and fines following kickback allegations in South Korea,
the United States and China. It also faces an upcoming trial in the
United States over alleged doctor bribery.
Last year, Narasimhan disavowed the 2017 consulting deal with
Trump's ex-attorney struck by his predecessor, Joe Jimenez, amid
accusations that Novartis had inappropriately sought favor with the
new administration. Novartis acknowledged mistakes but said it did
nothing illegal.
But the CEO believes negative feelings toward his company and the
industry can be reversed.
"It's a long journey back, but hopefully through consistent action
over a decade, we can get there."
(Reporting by John Miller in Zurich; Editing by Bill Berkrot and
Muralikumar Anantharaman)
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