Novartis CEO Critiques Trump's Drug Pricing Deals as Industry Braces for Change

Novartis CEO Vas Narasimhan has expressed skepticism about President Donald Trump's recent measures to lower drug prices, stating that they fail to address the root causes of high pharmaceutical costs in the United States. This criticism comes as the industry faces increasing pressure to reduce prices and improve affordability for patients.

Ongoing Negotiations and Industry Concerns

Narasimhan confirmed that Novartis is engaged in weekly discussions with the Trump administration regarding drug pricing, but no agreement has been reached. The CEO highlighted several key factors that he believes are not adequately addressed by the current proposals, including:

1. The role of pharmacy benefit managers
2. The 340B drug pricing program
3. Low prices in other nations

"From an industry wide perspective, I think the pharma industry's view is that the proposed negotiations or proposed actions are not going to address the underlying issues here," Narasimhan stated during Novartis' third quarter earnings call.

The Trump administration's approach includes four key parameters, as outlined in a White House fact sheet from July:

1. Implementation of Most Favored Nation drug pricing
2. Direct-to-consumer marketing
3. Leveraging trade policy to help manufacturers raise prices elsewhere
4. Agreements to ensure manufacturers do not offer better prices in other markets

While some pharmaceutical companies, including Pfizer, AstraZeneca, and Amgen, have announced plans to offer certain medicines directly to consumers through company programs or the proposed TrumpRx platform, Narasimhan emphasized the need for a more comprehensive solution.

Financial Performance and Strategic Moves

Despite the ongoing pricing debates, Novartis reported strong financial performance for the third quarter, with total sales reaching $13.9 billion, representing approximately 8% growth. However, the company faced challenges from generic competition, which had a negative impact of about 7 percentage points on sales growth.

To combat generic erosion and strengthen its pipeline, Novartis has been actively pursuing strategic acquisitions and partnerships. Notable recent moves include:

1. A $12 billion offer to acquire Avidity Biosciences, announced over the weekend
2. The $1.4 billion acquisition of Tourmaline Bio in September
3. Multiple licensing deals worth billions of dollars

The Avidity Biosciences acquisition is particularly significant, bringing a portfolio of late-stage RNA neuromuscular programs to Novartis. These include candidates for Duchenne muscular dystrophy (DMD), facioscapulohumeral muscular dystrophy (FSHD), and myotonic dystrophy type 1 (DM1). CFO Harry Kirsch noted that the deal is expected to contribute two near-term product launches with multi-billion-dollar market potential, with exclusivity extending into the 2040s.

While the acquisition is projected to cause short-term core operating profit margin dilution of about one or two percentage points over the next three years, Kirsch expressed confidence that Novartis will return to its target 40% profit margin in the long term.

As the pharmaceutical industry continues to navigate complex pricing pressures and regulatory challenges, companies like Novartis are focusing on innovation and strategic acquisitions to drive growth and address unmet medical needs. The ongoing dialogue between industry leaders and policymakers will likely play a crucial role in shaping the future landscape of drug pricing and access in the United States and beyond.