Setting a price, delivering value
Our primary focus at Novartis is on producing innovative pharmaceutical products to improve lives. We believe that developing innovative medicines that prevent and cure disease is the best way to improve patient wellbeing while saving money for societies.
During 2007, Novartis has received 15 major regulatory approvals in the US and the European Union for new pharmaceutical products.
Our current product portfolio includes more than 45 key marketed products, many of which are leaders in their respective therapeutic areas.
We work diligently to improve patient access to medicines, and we are constantly exploring ways to make medicines more accessible and affordable for less affluent patient populations.
When we bring products to market, we do not unilaterally determine the price of drugs.
In most European countries, for example, prices are negotiated with national agencies. They set prices based on the cost of existing therapies, overall healthcare impact and benchmarks in other countries. Increasingly these agencies use Health Technology Assessment as an economic framework to assess the value of new medicines. This approach systematically reviews the incremental costs of new medicines against their savings to the healthcare system and the incremental benefits to patients and societies.
However, we are concerned about the significant gap between marketing authorization and coverage of medicines through national health services and sick funds. While the European Commission requests that final decisions about pricing and reimbursement of pharmaceuticals be made within 180 days, most European countries still require longer, and in some cases significantly more than one year. During this time, patients usually do not have access to new and improved medicines.
Drug prices vary across countries. While the prices that manufacturers charge to the distribution chain (wholesales, pharmacists) are converging within geographic regions (the prices within Europe for new medicines are on average only +/- 10% different from the regional mean), the prices that consumers pay at the pharmacy still vary significantly. On top of the manufacturer price, charges to wholesalers and pharmacies as well as Value Added Tax may double the price at the pharmacy in some countries (e.g. Austria), where they increase the price by only 12% in other markets (e.g. UK and Sweden).
National authorities often demand the minimum price or the average price across a basket of reference countries. Further, free trade regions, such as the European Union, allow distributors to purchase goods in the cheapest market, and sell them in higher priced markets. This practice results in 'exporting' price controls, which counters the principle that goods should be priced differently across the world, in line with the wealth and ability to pay of different countries.
Manufacturers face a situation where their revenues could actually be reduced by launching medicines into a lower price market. As a consequence, patients in these markets may be deprived of new medicines. The issues caused by price controls in the presence of free trade have been recognized by the European Commission, but to date no mutually agreed solution has been found to address the problem.