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Novo Nordisk sees US price cuts in 2019

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Novo Nordisk sees US price cuts in 2019

Novo Nordisk A/S said it expects lower post-rebate drug prices due to policy changes in the U.S.

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Novo Nordisk A/S CEO Lars Fruergaard Jørgensen
Source: Novo Nordisk

The Danish drugmaker expects average prices after rebates to be lower in 2019 mainly due to basal insulin pricing and the changed Medicare Part D coverage gap legislation.

As part of the Trump administration's efforts to bring down the cost of medicines, the Centers for Medicare and Medicaid Services is allowing Medicare Advantage to negotiate discounts with drug manufacturers, likely pushing them to lower their prices. The Medicare changes would result in a negative impact on sales growth of between 1% and 2% in 2019, CEO Lars Fruergaard Jørgensen said during the company's conference call for the media.

Novo Nordisk booked a 4% year-over-year drop in second-quarter net sales to 27.41 billion kroner. In the first six months, total sales declined 5% to 54.34 billion kroner.

Although it will not follow suit with price increase rollbacks by Pfizer Inc. and Merck & Co. Inc., Novo Nordisk said it will not raise prices for the remainder of the year. The company will also keep its pledge to limit annual list price hikes to below 10%, Jørgensen said during the call, which was held shortly after the company published its second-quarter earnings.

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Jørgensen said Victoza, the company's GLP-1 therapy for type 2 diabetes, is not seeing any pricing pressure outside of the U.S. "We see good growth for Victoza both in the U.S. and outside the U.S.," he added. This is contrary to the persistent pricing pressure experienced by Eli Lilly and Co., maker of Trulicity, a competitor to Victoza.

Meanwhile, Novo Nordisk has no plans to execute a major layoff program, Jørgensen said, in response to recent reports that the company is considering cutting 3,000 jobs due to U.S. market conditions.

"We plan to reduce our spending on activities that do not directly benefit patients or drive sustainable growth for the company," Jørgensen said. "We are also simplifying our procedures for governance and pursuing opportunities for increasing efficiency through automation, outsourcing and offshoring."

Bagsværd, Denmark-based Novo Nordisk is in the process of consolidating its manufacturing process, reducing its headcount by "a couple of hundreds," Jørgensen said. Changes in the company's China research activities and the previously announced restructuring in Japan has also lead to a reduction in the workforce.

As of Aug. 7, US$1 was equivalent to 6.43 Danish kroner.