Zurich's pharmaceutical giants Roche and Novartis are fighting for US investments!

Zurich's pharmaceutical giants Roche and Novartis are fighting for US investments!

The two large pharmaceutical companies Roche and Novartis are planning massive investments in the USA. Loud MarketScreener Roche will invest around $50 billion in new factories and research laboratories over the next five years. Novartis, on the other hand, is targeting investments of $23 billion. However, these plans are under pressure given planned drug price discounts by the US government.

US President Donald Trump has ordered the Department of Health to begin negotiations with pharmaceutical companies within 180 days. A list of guide prices for medicines is to be drawn up in the next 30 days. Trump's approach could result in pharmaceutical prices being regulated on a most-favored-nation basis, which could result in price cuts of 50 to 90 percent.

Uncertainties and challenges

The uncertainty about the profitability of these investments raises concerns for Roche. The company has expressed concerns about whether the high spending would be worthwhile in an environment where legislative measures are being sought to reduce drug prices. Loud NZZ Roche generates 54 percent of its pharmaceutical revenue in the United States, underscoring the importance of this market for the company.

In addition, Trump is threatening industry-specific tariffs on pharmaceutical products, which could put additional strain on companies. The lobbying organizations warn that the introduction of the most favored nation clause could have serious consequences for future investment projects in the USA. To counteract this, Roche and Novartis are relying on lobbying to influence the US government's actions.

Future outlook

Both companies hope to create goodwill with the new U.S. administration through their investments. Industry observers at UBS expect that the status quo in drug prices in the USA will remain in place for the time being. Due to past procedural obstacles, previous attempts to enforce the MFN clause failed. Roche has also reduced its number of drug development projects and optimized its cost management in order to better respond to the changing market situation.

While Novartis also pursues its own interests, such as making improvements to the role of pharmacy benefit managers, it remains to be seen how the US government's plans will affect the long-term strategy of the two pharmaceutical companies. Novartis plans to have over 30 production sites worldwide by the end of 2024 and is already achieving significant sales distribution, with the US market accounting for 42 percent of total sales. The coming months could be decisive for how the environment for pharmaceutical companies in the USA develops.