Novartis AG CEO Vasant Narasimhan has joined industry peers in issuing a warning regarding medication accessibility for European citizens. Narasimhan stated in an interview with CNBC that the full impact of the U.S. "Most Favored Nation" (MFN) drug pricing policy will become apparent over the "next 18 months." Former President Donald Trump prioritized reducing U.S. drug prices and has long criticized what he described as foreign nations benefiting from American-funded innovation.
The CEO of Novartis AG warned on Tuesday that the drug pricing policies advanced by the Trump administration will create a "very challenging situation," with effects soon impacting both pharmaceutical companies and patients simultaneously. "The long-term consequences will be significant," CEO Vasant Narasimhan told CNBC's Carolyn Roth. "The practical effects of the Most Favored Nation policy will materialize gradually over the coming 18 months."
He noted that Novartis is actively urging governments in Europe and Japan to swiftly adjust their frameworks for rewarding innovation. Without timely reforms, new medicines could face delays entering these markets, potentially leaving patients without access to necessary treatments. The MFN drug pricing model, implemented by the Trump administration last year, mandates that drug prices in the lucrative U.S. market be aligned with those in other similarly wealthy nations. Trump made lowering drug costs for Americans a key policy focus, consistently arguing that foreign countries were free-riding on innovation funded by the United States.
Narasimhan's comments echo concerns raised by other pharmaceutical executives, who have expressed dissatisfaction with issues such as market fragmentation in Europe, burdensome administrative hurdles, and unfavorable pricing policies. Companies including Roche and AstraZeneca have recently cautioned European nations that they risk delays in the introduction of new drugs unless inadequate investment in medicines and an unfavorable policy environment are addressed.
Narasimhan informed CNBC that the current financial impact of the MFN policy on Novartis's revenue and profit remains limited, primarily affecting its Medicaid business segment, which accounts for approximately 5% to 10% of sales. He added that while "positive initial discussions" have taken place with European governments, concrete action has been lacking. "There is awareness among the various parties, but I don't believe the full scale of the impending impact is yet fully appreciated," he stated.
Earlier this month, the German government unveiled a proposal aiming to cut spending within the national healthcare system to address a funding shortfall amounting to tens of billions of euros. These measures include enforcing deeper discounts on patented medicines. "We have observed some recent actions in certain countries, for instance the developments in Germany, but the direction is entirely wrong, which is deeply concerning," Narasimhan remarked. "These governments must now take this matter seriously because the MFN policy is already in effect, and I do not foresee it being repealed in the U.S. in the short term."
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