Colombia Makes Good On Its Threat Against Novartis AG (NYSE:NVS)

Colombia Makes Good On Its Threat Against Novartis AG (NYSE:NVS)

After negotiations with Novartis AG (NYSE:NVS) to lower the price of key leukemia drug Gleevec broke off, the Colombian government is set to take matters into its own hands. The regime now wants to force Novartis to lower the price of a key cancer medicine it sells in the country. That comes at a time when Colombia is struggling with an overburdened public health system amid a rising cost of medication for its citizens.

Novartis and Colombia were negotiating to try and find a way to make the leukemia drug Gleevec more affordable for patients in the country. But Colombia’s Health Minister, Alejandro Gaviria, has revealed that nearly two weeks of talks didn’t yield a deal and what remains now is for the country to follow through on its earlier threat: unilaterally forcing Novartis to lower the price of Gleevec.

No room for copycats

Colombian authorities had made at least two threats to Novartis in the matter of Gleevec pricing. They said they would compel the company to sell the drug to Colombian citizens at more palatable prices, which according to economic law of supply and demand will lead to shortages. The alternative was to pave the way for generic drug manufacturers to take on Gleevec in the leukemia treatment market.

However, the latest comments from the country’s health minister suggest that Colombia favors forcing Novartis to lower the price of Gleevec rather than paving the way for copycat competitors. Gleevec’s marketing exclusivity in Colombia will expire in 2018.

The cost of Gleevec

Treatment with Gleevec for a year costs $15,000 in Colombia. That’s almost double the annual income of an average Colombian. According to the government, the higher prices that Novartis charges for Gleevec means it will have to part with an extra $15 million every year to supply Gleevec through the public health system.

Although forcing Novartis to lower the price of Gleevec may strain the relationship between Colombia and the U.S., the country believes the move is in the best interest of its citizens. Details of communications between authorities in Colombia and their representatives in Washington D.C. reveal intense lobbying by drug companies against a move to unilaterally force Novartis to sell Gleevec at a lower price. Novartis could end up simply leaving the Colombian market and not selling Gleevec at all there if it is forced to sell it at a loss.

Gleevec is Novartis’s bestselling drug. It generated sales of more than $4.7 billion in 2015.