Novo Nordisk said to plan Major Layoffs

Drugmaker Novo Nordisk plans to cut as many as 3,000 jobs and may reduce its financial guidance, according to a report in the Danish financial newspaper Borsen. The paper, citing unnamed sources with knowledge of the process, said the diabetes specialist needs to lower costs to deal with pricing pressure in the US.

Borsen said Novo’s management will present the savings plan to its board later this month and make a further-reaching announcement when it presents second-quarter results in August.  The company employs more than 42,000 people.

Analysts speaking to the US trade journal Fierce Pharma explained that, like other international drugmakers, Novo will have to offer bigger discounts to the US elder care program Medicare starting in 2019 and will have to find ways to offset the negative impact.

The bigger discounts are a provision of the budget deal passed by the US Congress last autumn, raising the pharma industry's contribution to closing the Part D "donut hole" gap in Medicare spending to 70% from 50%.

Manufacturers of drugs in high demand from the Medicare program, such as those recommended to treat diabetes or COPD, will have to bear an above-average share of the healthcare budget. In its first-quarter report, Novo forecast that the additional 20% burden could cost it 1- 2% of group’s sales in 2019.

Other drugmakers that have come under pressure to drop prices for US Medicare in the recent past are said to include Eli Lilly of the US and France’s Sanofi. According to analysts, British pharma giant GlaxoSmithKline has already offered large discounts on its COPD drug branded as Advair.

In response to pressure from US health insurers in 2016, Novo Nordisk was forced to cut prices and lay off 1,000 employees. It also reduced its long-term guidance. To boost its deteriorating share price, the Danish company is currently engaged in a share buyback scheme that will run until Aug. 6.