09.03.18

Novartis to Streamline Production as US Drug Prices Decline: Report

Source: FirstWord

Novartis chairman Joerg Reinhardt said the company plans to streamline its production and other processes aiming to increase its operating profit margin as it positions for possible further declines in US drug prices, NZZ am Sonntag reported Sunday. Specifically, Reinhardt said that his company is taking steps to increase its operating profit margin from 32 percent to around 35 percent in no more than five years, and is closely watching developments in the US.

“Many of our 68 plants aren’t being fully utilised. We’re trying to achieve an optimisation globally,” Reinhardt said, adding that “in other areas too, we need to operate simply and more efficiently, and that includes centralised services as part of our business services organisation.” More broadly, “we are preparing for the fact that in the medium term there will be changes in the US pricing system that will affect the entire pharma sector,” he remarked.

The executive noted that drug prices are rising marginally if at all in Europe, while those in the US have been declining for a year. Proceeds from the sale of drugs in the US fell between 1 percent and 2 percent last year, due to discounts drugmakers have to grant large buyers to sell their drugs in the US, he said. Reinhardt added that drugmakers can still charge slightly higher or stable prices in Europe.

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