Swiss pharmaceutical CEO: US patients will ultimately bear the cost of generic drug tariffs threatened by President Donald Trump sand told CNBC, warning that manufacturers could be forced to raise prices or cut supplies of some drugs.
“Patients are paying the tariff,” Sandoz CEO Richard Sayner said in an interview with CNBC on Capital Markets Day.
“No company is going to systematically continue supplying products at significant losses,” he said on Tuesday. “So the choice is either to raise the price or not supply the product.”
President Trump said in July that his administration was trying to encourage drug companies to move drug manufacturing to the United States, and that imported generic drugs would be subject to 100% tariffs starting in 2028, which could rise to as much as 200% a year later.
Generic medicines are currently exempt from the government’s drug tariff section 232. CNBC has reached out to the White House for comment.
Branded drug companies typically spend years developing expensive new drugs and, once approved, benefit from exclusivity that allows them to sell those drugs without direct competition for a limited period of time. In contrast, generic drug makers like Sandoz enter the market after their patents have expired and often compete on price, manufacturing efficiency, and scale with other companies selling nearly identical versions of the same drug.
Although generic drugs account for approximately 90% of prescriptions in the United States, their low prices make them a relatively small portion of total drug spending.
Thaner reiterated that while approximately 9 out of 10 prescriptions filled in the United States are generics and biosimilars, many of the underlying drug substances are produced overseas.
Sandoz is one of the world’s largest manufacturers of off-patent drugs, with about a quarter of its sales coming from North America, including Canada.
sandoz stock price
The CEO’s comments came as Sandoz announced new initiatives to take advantage of an unprecedented wave of patent expirations and loss of exclusivity for branded drugs to create opportunities for new generic and biosimilar competition, particularly in immunology and oncology.
The company’s Swiss-listed shares rose as much as 5% on Tuesday, but were lower in afternoon trading, trading around 1% lower.
multi-billion dollar opportunity
The company said it aims to more than double net sales and increase core profit margins to more than 30% by 2035. Jefferies analysts noted that the revenue target is about 13% above the current consensus for 2035.
Sandoz also said he wants to expand the company’s biosimilar product portfolio from 13 products today to more than 100 products by 2040.
Analysts at RBC said targets vary, and the medium-term target for 2030 looks “light”.
“However, the 2035 target is more ambitious and indicates an expected acceleration into the early 2030s, a period of high market launch for new biosimilars,” the analysts added.
Weight loss drugs and GLP-1 diabetes drugs are not currently included in the company’s 2035 sales target, but will provide further upside, the company said. Asked by CNBC to quantify the opportunity, Seiner said Sandoz’s GLP-1 business “could bring in billions of dollars, but I have no idea how many billions it will be,” noting that the market is still in its infancy.
Sandoz received approval to launch its active ingredient, generic semaglutide, in Brazil earlier this year. novo nordisk Ozempic and Wegovy, which are expected to be approved in Canada soon. The major markets of the US and Europe will not lose exclusivity until early next year.
Generic drugs are lower-cost versions of off-patent traditional drugs, while biosimilars are substitutes that closely resemble more complex biological drugs. Sandoz aims to increase the value of biologics that lose patent protection by about 80% after 2035, up from about 50% today.
Because biosimilars are more complex, Sayner believes there are fewer competitors in this space.
“There remain complex areas that require capital, scale and technical expertise. There are very few players who can do this, and given the sheer size and number of[losses of exclusivity]going forward, we expect the intensity of competition at the asset level to decrease.”
Sandoz becomes an independent company in 2023 after Swiss pharmaceutical giant Novartis We separated our generic drug and biosimilar businesses and focused solely on branded drugs. Saynor has been leading the business since 2019.
