Novo Nordisk Takes a Hit on China Insulin Price Reductions

Last week, stock prices of two global insulin-manufacturers (Novo Nordisk and Lilly, but Novo Nordisk suffered far more than Lilly did) took a hit on news related to their Chinese operations (see https://www.fiercepharma.com/pharma-asia/novo-nordisk-sanofi-eli-lilly-cut-insulin-price-china-s-latest-vbp-off-patent-drugs AND https://endpts.com/china-boasts-48-price-cut-on-insulin-as-domestic-drugmakers-eclipse-big-pharma-in-bulk-order/ for more). Inclusion in China's National Reimbursement Drugs List requires volume-based procurement (VBP) discounts. Chinese sales have enabled a number of drug companies to pump-up their sales growth in recent years, but having to sell the drugs at a discount cuts into their margins. 

According to shareholder disclosures made by Novo Nordisk, last month, China's National Healthcare Security Administration (NHSA) added 67 medicines which are branded drugs with no generic versions available in China including insulins for the very first time. The news hit Novo Nordisk particularly hard. Danish diabetes drugmaker Novo Nordisk A/S disclosed that its sales growth would slow by 3% in 2022 because of lower prices and reduced sales volume specifically in China. Diabetes drug makers agreed last month to cut prices by 48% on average in order to be qualified to bulk supply public hospitals. Rival Lilly, which has a more diversified revenue stream than Novo Nordisk does was also impacted by the China NHSA announcement, just not by as much as Novo Nordisk was. This was the first time NHSA has included insulin on its list.

While the hit to pharma companies' stock prices was short-lived, it is worth acknowledging that Novo Nordisk Fiasp and Tresiba (insulin degludec) were the primary sales hits because no other Novo Nordisk insulin varieties are currently on the NHSA list in China to be hit, and in fact, several of its insulin products have already been copied by Chinese drug manufacturers and are already sold as biosimilars at much lower prices in China. Also, the company's cash-cow (Victoza, as well as several label extensions of that product) are also facing Chinese biosimilars, although only insulin was added to the NHSA list so far.

For example, Novolog (insulin aspart) has been "generic" in China for a few years, and in fact, several Chinese manufacturers are now planning to export versions of aspart to the U.S. as biosimilars to be commercialized by U.S.-based drug company partners. Among them: Lannett Company which plans to sell an aspart biosimilar made by China-based HEC, and Sandoz (which itself is due to be spun-off by parent company Novartis) plans to sell a biosimilar made by China-based Gan & Lee to name two specific examples. Both Lannett and Sandoz had planned to use the cost-savings of making the insulin in China to bribe (I mean rebate) PBM's to secure commercial healthcare insurance company formulary placement in the U.S. They likely still will, but they will likely be selling two versions of their biosimilar products: a rebated version, and an un-rebated version, as Viatris/Biocon recently did with Semglee and Viatris Insulin Glargine (catch my post HERE for more).

Sanofi's diabetes business (or at least what's left of it) itself is in the process of being spun-off as a standalone commodity drug company to be known as EuroAPI, was not impacted at all by the NHSA announcement because none of its diabetes products still enjoy patent-exclusivity protection in China. Its bestselling product is Lantus (and a U-300 version branded as Toujeo) is widely copied by local manufacturers in China.

So, in essence, in November 2021, China took some wind out of Novo Nordisk's sails because the country forced the Danish company to slash prices in China by about 48%. 

No one in the U.S. should be crying for Novo Nordisk. The company has for many years used profits derived from sales in the United States to become a global drug seller. The company endured a much more sustained challenge starting around 2016-2017 when its PBM-rebating problem in the U.S. blew up in its face. It forced the company's CEO to "retire early", something which NEVER happens in Denmark. I blogged about that at the time HERE. In addition to the CEO calling it quits, Novo Nordisk faced shareholder lawsuits, including one which was only settled in 2021, resulting from that debacle.