Novartis to streamline production as US prices decline

Swiss drugmaker Novartis’ logo is seen at the company’s plant in the northern Swiss town of Stein, Switzerland October 23, 2017. (Reuters pic)

ZURICH: Swiss pharmaceutical company Novartis AG wants to increase its operating margins by making production and other processes more efficient as it positions for possible further declines in US drug prices, its chairman said in an interview.

Joerg Reinhardt told the newspaper NZZ am Sonntag that his company is taking steps to increase its operating profit margin towards 35% in no more than five years, from 32%, and is closely watching developments in the US.

“Many of our 68 plants aren’t being fully utilised. We’re trying to achieve optimisation globally,” Reinhardt said. “In other areas too, we need to operate simply and more efficiently, and that includes centralised services as part of our Business Services organisation.”

More broadly, “we are preparing for the fact that in the medium term there will be changes in the US pricing system that will affect the entire pharma sector,” said Reinhardt.

While drug prices in Europe are rising marginally if at all, those in the US have been declining for a year, he said.

Basel-based Novartis makes a range of pharmaceutical and consumer healthcare products. Among its biggest-selling pharma lines are the multiple sclerosis drug Gilenya and Cosentyx, which is used to treat plaque psoriasis and psoriatic arthritis.