Novo Nordisk to limit price increases on drugs to single-digit percentages annually

Novo Nordisk disclosed that it will limit price increases on its medicines to single-digit percentages annually, becoming the second drugmaker after Allergan to announce such a move. Novo Nordisk president Jakob Riis said "we recognise that people with diabetes are finding it harder to pay for their healthcare, including the medicines we make," adding "as a company focused on improving the lives of people with diabetes, this is not acceptable."

According to Riis, the limit on price increases will create "more pricing predictability" in the US market, so customers including pharmacy benefit managers (PBMs) and payers can budget more effectively. The executive explained that the previous price increases, which, for example, have seen the list price of NovoLog (insulin aspart) increase 280 percent since 2006, came in "response to changes in the healthcare system, including a greater focus on cost savings, and trying to keep up with inflation."

Riis noted that as "rebates, discounts and price concessions" to payers "got steeper," Novo Nordisk was "losing considerable revenue – revenue we use for R&D, sales and marketing, education, disease awareness activities and medical information support." Riis added "so, we would continue to increase the list in an attempt to offset the increased rebates, discounts and price concessions to maintain a profitable and sustainable business"

FirstWord Reports: Providing insight, analysis and expert opinion on important Pharma trends and challenging issues <Click here>

As part of its pledge to limit price increases, Novo Nordisk is seeking to simplify drug pricing, calling for collaboration among pharmaceutical companies, payers, PBMs, insurance companies, employers, patient organisations and policy makers. Riis noted that "the system we currently have is very complicated," with prices paid by customers influenced by several variables, including rebates, discounts, administrative fees, co-pays and deductibles.

Novo Nordisk also indicated that it would take several other steps to limit patient spending. Specifically, the company pledged to continue to invest in its co-pay assistance programmes and maintain a patient assistance programme. The drugmaker also indicated that it will guarantee the availability of lower-priced human insulin and engage policy makers to ensure the best possible coverage for patients with diabetes.

In October, Novo Nordisk cut both its full-year guidance and long-term financial targets due to challenges in the US market, as well as forecasts for 2017. The move came shortly after the company unveiled plans to reduce its workforce by around 1000 employees in an effort to cut costs. At the time, CEO Lars Rebien Sørensen said the restructuring "is needed in order for us to have a sustainable balance between income and costs."

For related analysis, see ViewPoints: Allergan and Express Scripts applaud Novo Nordisk's stance on drug pricing. See also ViewPoints: Dramatic changes at Novo Nordisk, and read ViewPoints: Pricing headwinds continue to redefine US market expectations.

To read more Top Story articles, click here.