Novartis AG, Roche Cry Foul On New Swiss Pricing System

Published: Sep 16, 2014

Novartis AG, Roche Cry Foul On New Swiss Pricing System

September 16, 2014

By Jessica Wilson, Breaking News Staff

Switzerland recently announced it would amend its pricing system for drugs in order to put downward pressure on drug costs for Swiss citizens, Reuters reported Tuesday.

Switzerland is home to the world’s two biggest pharmaceutical companies by market capitalization, Novartis AG and Roche , and both companies have already taken issue with this decision.

To complicate matters, Roche and Novartis, are essentially the engine of the Swiss pharmaceutical industry, employing 40,000 people in Switzerland, with worldwide sales greater than $70.5 billion in 2013.

“The consequence of this [government action] would be a significant weakening of the pharmaceutical companies that are active in Switzerland, which would inevitably have a negative impact on their future contribution to the Swiss economy and employment,” industry lobby group Vips warned.

Although sales in Switzerland comprise a small percentage of the pharmaceutical companies’ total sales, the companies complain that pressure for lower drug prices in Switzerland, other countries will expect the same treatment.

“You have to question whether we should give out our medicines in our home market for a price that is 20-30 percent cheaper than in the neighboring EU,” Roche Chairman Christoph Franz told BaslerZeitung in a recent interview. “It's obvious that we can't do this from the signal it would send alone.”

Switzerland’s drug spending profile differs significantly from that of other European countries and the U.S. According to the Organization of Economic Cooperation and Development. Swiss per capita spending on pharmaceuticals is only $562 per capita, it is almost half of the $1,010 spent in the United States, and well behind other European countries including Greece, Belgium and Ireland.

That isn’t the entire picture, though. Drugs in Switzerland cost on average 5 percent more than what Reuters called the “comparative benchmark” of six other European countries--Denmark, Austria, Germany, the United Kingdom, France and the Netherlands at the end of 2013.

Switzerland’s efforts are part of a greater European-wide move to pressure pharmaceutical companies to lower drug prices. Both Roche and Novartis believe, however, that governments and insurance companies will still pay for truly innovative medicine.

“The reason why I'm optimistic is that even after 2008, the financial crisis, and two years later when many countries in southern Europe were having a very hard time, we were able to get reimbursement for (our multiple sclerosis drug) Gilenya, because it had best-in-class efficacy,” Novartis Chief Executive Joe Jimenez said at the end of August.

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