Novartis chief criticises EU move to control pharma licensing in emergencies

The chief executive of Swiss drugmaker Novartis has criticised proposals to give the EU licensing powers over pharmaceutical patents in emergencies, saying such a move would hit investment.

The Financial Times reported this week that the EU was considering a compulsory licensing mechanism for emergencies, allowing it to take control of drug manufacturing if there was another crisis such as the Covid-19 pandemic. The proposals would also reduce monopoly protections for drugmakers.

Vas Narasimhan told reporters on Tuesday that these changes would “only make Europe less competitive”.

“Compulsory licensing will damage the ecosystem for emergency response,” he said. “It’s just not a sensible strategy.”

He added it was more important to strengthen intellectual property protection, which would encourage companies to invest “even in the case of hard-to-predict pandemics”.

In an interview with the FT, Narasimhan said he could not think of a similar time in the past, “where intellectual property [rights] have been systematically eroded”.

“Real fundamental changes are pretty infrequent because the knock-on effect on investment is significant,” he added.

Narasimhan, who has been chief of Novartis since 2018, said the latest proposals were part of a broader pattern of more intervention by policymakers.

“Post pandemic, we’ve seen more restrictive measures in terms of various mechanisms — whether France, Germany or the UK trying to use their discretionary power to claw back revenue growth from companies,” he said.

“I’m cautiously optimistic that countries will start to realise as they see material shifts in our investment patterns that they need to change course.”

Drugmakers are under pressure from governments in the EU, UK and the US to cut prices.

Narasimhan also criticised changes in the Inflation Reduction Act to exclusivity periods for drugs in the US. The current average is 12.5 years, but this will become nine years for tablets and 13 for injections and infusions.

He said this could affect investment in cancer treatments given in tablet form in particular.

The Novartis chief executive, who recently took over as chair of US industry lobby group PhRMA, said the company was pushing for 13 years of market exclusivity for all drugs.

“The two continents are both doing problematic policies. Of course, the difference is that the in the US the market opportunity, market size and the overall dynamics are much more positive than in Europe,” said Narasimhan.

He made his remarks as Novartis increased its forecast for sales and core operating income in 2023 after an 8 per cent constant-currencies rise in sales to almost $13bn in the first quarter, boosted by heart failure drug Entresto.

Narasimhan is refocusing Novartis on pharmaceuticals and has disposed of the company’s consumer health and eyecare divisions. Novartis recently said it would spin off its generic drugmaking business Sandoz. Narasimhan said the most recent results demonstrated “the strategic transformation for Novartis”, with five therapeutic areas now leading the financial performance.

Novartis shares rose 2.8 per cent in mid-afternoon trading, reaching highs not seen since early 2020.