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Novartis' CEO Wants to Help Lower the Cost of Medicine in the U.S.

June 14, 2016 00:00 AM UTC
- Updated April 29, 2020 17:33 PM UTC

But says big pharmaceutical companies can’t do it alone.

Joe, the presidential candidates have been talking very forcefully about high drug prices and they want to do something about it. What is your reaction? What I say is, let's look across the entire health care system, from pharmaceuticals to the insurance companies, to the hospitals, and the physicians, and let's dissect the true cost of managing a disease. Let's look at what are the inputs that lead to a positive outcome and get rid of everything else, and we think we can save substantial amounts of money. Well, people want these breakthrough drugs. They just can't afford the high prices, and a lot of these insurers you're talking about don't want to reimburse people. It's not just about the copay-- I mean, what really is the solution on pricing. I think the solution is we have to shift from what has been a transactional approach with the health care system, where we're selling pills-- the number of pills that we sell, we get paid for-- to an outcomes based approach, where we're getting compensated based on that outcome of this medicine, and an example of this is our new heart failure drug, Entresto, that actually reduces hospitalization by about 20%. That's a massive savings for the health care system, so if we can shift more and more towards outcomes based pricing, we can look at all the interventions that are leading to that outcome, whether it's the drug or hospitalization or physician care, and then we can get rid of the elements that are not leading to the outcome. We think that will save about 25% of health care costs in the US. Joe, do you think, though, that at some point, it's just a matter of time that between the presidential candidates, the patients, and the providers that there's going to be so much pushback on pharma companies like Novartis to say, cut back your prices? Look, we want to be part of the solution, so I would say, we're going to work. We are right now working with patient groups and payers and providers to find a solution, and it's not just pharmaceuticals. Remember, pharmaceuticals is just 15% of the total health care spend bill, and I think what we need to do is find a solution that addresses sustainability, meaning not just pharmaceutical pricing, but also hospitalization costs and physician costs and nursing costs. Let's look at the entire ecosystem, and then let's come up with a way to really make this a sustainable system.