Novo's Legal Challenges Mount as States Query Insulin Pricesby
New Mexico, Washington state attorneys general seek details
Shares surge after profit, sales beat estimates last quarter
Novo Nordisk A/S’s legal challenges are mounting in the U.S. as authorities from Washington state to New Mexico question its pricing policies and the Danish drugmaker settles a probe of its marketing practices that allegedly included disguising salespeople as medical educators.
The world’s biggest maker of insulin has also been targeted along with rivals Eli Lilly & Co. and Sanofi in four lawsuits filed in recent months accusing the drugmakers and some pharmacy benefit managers of colluding to inflate insulin prices, the Bagsvaerd, Denmark-based company said as it reported results on Wednesday. The Attorney General’s offices in Washington and New Mexico also requested information related to insulin prices, Novo said in the statement.
The legal issues add to pressure on new Chief Executive Officer Lars Fruergaard Jorgensen as Novo grapples with intensifying competition in the U.S. The first quarter showed some relief, though, as efforts to cut costs helped profit exceed analysts’ estimates. The stock surged as much as 7.4 percent, the biggest gain in almost six months.
The scrutiny of Novo’s insulin prices is a “reflection of the growing importance of diabetes and the concern about the cost of diabetes medications in the U.S.,” Jesper Brandgaard, Novo’s chief financial officer, said in a phone interview.
Novo is cooperating with the two states’ information requests and said it doesn’t expect those probes to have a “material impact” on its financial position, operating profit or cash flow. Legal cases will bring additional costs, however, according to Brandgaard.
“When there are requests for information, we will collaborate with the authorities in providing that information,” he said. “As a starting point, we don’t believe we’ve done anything wrong.”
The company last week said that it agreed to settle the U.S. Justice Department’s investigation, but that the process isn’t complete. The allegations were disclosed when a whistle-blower lawsuit was unsealed by a judge. The suit claimed that Novo violated the law by wrongfully inducing doctors to write prescriptions for Victoza that were covered by federal health-insurance programs.
Novo has set aside funds for the settlement and will wait until it’s finalized before making additional comments, Brandgaard said.
Pending legal matters in its latest annual report included a March 2016 request from the U.S. Attorney’s Office for the Southern District of New York regarding its ties to pharmacy benefit managers and a Jan. 18 demand from the Attorney General’s office in Minnesota. Last year, the Justice Department also requested information related to Novo’s hemophilia patient-support programs and marketing of its treatment NovoSeven, according to the report.
Novo shares rose 6.5 percent to 281.80 kroner at 1:21 p.m. in Copenhagen trading. Net income rose to 10.2 billion Danish kroner ($1.5 billion) in the first quarter. The company lifted its forecast range for sales and operating profit growth by 1 percentage point, citing a favorable currency impact.