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Novartis CEO: Nations pulling back on health care spending ‘has long-term consequences'

Novartis CEO Vasant Narasimhan joins Yahoo Finance Live's Julie Hyman at the 2023 World Economic Forum in Davos, Switzerland, to discuss drug pricing, the future of medicine, the impact that health can have on economies, growth, and the outlook for the health care industry.

Video Transcript

[AUDIO LOGO]

[MUSIC PLAYING]

JARED BLIKRE: Yahoo Finance's Julie Hyman had a chance to speak with Novartis CEO Vas Narasimhan at the World Economic Forum in Davos. They spoke about everything from drug pricing to the future of medicine. Take a listen.

VASANT NARASIMHAN: There's a lot more sensitivity to the impacts that health can have on economies and overall stability in countries. But I do think there are opportunities for us to improve. I mean, one concern I have is with the overall macroeconomic situation that we see right now across all of the geographies here at the WEF. You see the need to pull back financing. And will there be a pullback on financing for healthcare, particularly in low and middle income countries, but we also see that in Europe as well.

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And this is not the moment, I think, given all of the non-communicable disease, which wasn't treated during the pandemic, for governments to pull back on their investment in health. So one of our key messages has been to government leaders, you have to keep investing in health, keep investing in new technologies, keep being ready so that your healthcare systems are more resilient.

JULIE HYMAN: Are they pretty receptive to that? Are you encouraged by changes that you've seen in-- or at least progress that we've seen in healthcare systems around the globe?

VASANT NARASIMHAN: I think the pandemic allowed us to accelerate certain parts of resilience. I think there's a lot more sensitivity now in building strong supply chains for health products and vaccines, which is positive. That said, I think it's interesting to me how, one, we didn't make a lot of progress on pandemic preparedness for the future. That really hasn't taken off. And two, we already see signs that governments are pulling back healthcare spend as they face a fiscal crunch that we know is going to happen with the macroeconomic situation we're in.

I think what government leaders have to understand is that has long-term consequences. We know when you invest in health, you ultimately get better economic growth and also can reduce your expenditures in the future. So let's see. Let's see how it goes. You know how these things are. I mean, right now, we're a moment in time where the focus very much is on how inflationary pressures are going to lead to potential recessions in Europe and in the US.

JULIE HYMAN: And how is that going to affect your business? I mean, the conventional wisdom is typically that healthcare holds up relatively well during a recession. But of course, healthcare has gotten more expensive. So some of it maybe is seen by people as more discretionary, even if it's not really. Drugs are expensive. So how do you think this is going to play out this time around?

VASANT NARASIMHAN: Net for us, I think we're still on a very good trajectory. This pushes and pulls. I mean, one thing we have is a lot of pent-up demand from non-communicable diseases, which weren't treated, particularly in China, but also in other parts of the world. And so that's going to lead to an increase in demand for many of our medicines. That's a net positive. We have new launches, new products, new innovations coming forward, whether that's in cancer or cardiovascular disease. That's also a positive tailwind for our business.

The headwinds, though, are like I mentioned. Like, if you look at particular European governments, there's a push right now. We saw one example in the UK recently to pull back on spending on medicine and spending on healthcare. So that's the headwind we face. Still, I think net, I expect the sector to grow mid-single digit overall. And we also are on a good trajectory for 2023.

JULIE HYMAN: Does Novartis today look how you want it to look? In other words, you-- I mean, you're not alone. Certainly, in the industry, there's been a lot of restructuring over the past several years, remaking, refocusing drug businesses. So where are you in that process?

VASANT NARASIMHAN: You know, I always think back and look at the long history of a company like ours, 250-year-old company. 25 years ago, when Novartis was created in its current format, we were a broad healthcare conglomerate. We were in everything from baby food to generics to animal health. Now, over the last five years, we've done over $100 billion of transactions to focus ourselves on what I think is what we're best at and what we can have the most impact with, is innovative medicines.

And with the plan spin of Sandoz this summer-- as you know, the generics business gets spun-- we'll be a pure play innovative medicines company. What we're going to focus on are five key therapeutic platforms where we think we can generate the most drugs. Three of those platforms are things we call advanced technology platform, so it's things like cell and gene therapies and radioligand therapies, places where we think that's the future of medicine.

We'll continue to be a global player. We're the most global, we think, drug company in the world. We market our drugs in 108 countries, but a big focus on US, Germany, China, and Japan. That's where we think we'll have the most impact. And so taken together, I think it's a good setup for us now to be very focused in a really complex world and focus our capital on technology, on the future of medicine, and hopefully bring great medicines to market.

JULIE HYMAN: What's your take on the gene therapy business? I know some of the experimental treatments have not turned out. Some of them have. Where do you go from here? What's the strategy for that in 2023?

VASANT NARASIMHAN: You know, gene therapy is going-- has recently gone through a little bit of a nadir because we were the first company to launch a global gene therapy. It's been very successful. It's a blockbuster medicine, Zolgensma. Extraordinary that it can turn around the lives of children who face near certain death with a single injection.

But then we learned how hard the science is, how hard it is to deliver gene therapies to the right place in the body, how hard it is to get the right approach in terms of avoiding side effects. And so the field had to go through a lot of work. But my expectation is in the next few years, across the sector and in our company, we'll start coming forward now with more gene therapies.

What will be really important is, one, to be really educated healthcare systems again on how to fund one-time therapies. We, unfortunately, haven't made a lot of progress on that front. One-time therapies are very different than pills that are taken over and over again for decades. But net, I think over the next five to seven years, we will see a gene therapy Renaissance, I expect.

JULIE HYMAN: Vas, finally, a little bit more personal question, you're a relatively young guy. You're an American guy running this enormous Swiss pharmaceutical. As you said, 250-year-old company. Kind of, as you reflect on how you got here and where you want to go from here, what are some of your takeaways? Like, how did you end up doing-- I mean, it's-- I think the last time we met here in Davos, I was struck because I think we're around the same age. And here you are running a $200 billion company.

VASANT NARASIMHAN: Well, the beard is getting a little grayer, but overall, look, I've been extraordinarily fortunate. I feel tremendous gratitude. I mean, my grandparents came from villages in India, and now I stand, leading one of the largest and most important companies in the world. So I start from a place of gratitude. I've been very fortunate as well to have a lot of different experiences in R&D, in business, as a physician scientist, I now bring to this role. And I think it's just an amazing opportunity to shape global health with such a position as Novartis.

So when I look ahead and I see all of the technological advances we have, on the one hand, I think we can still keep pushing, let's call it the high science, and at the same time, bring access to hundreds of millions of patients. At the end of the day, for me, what gets me up in the morning is the fact that we reached 300 million patients a year with these medicines. And for a physician scientist, there's nothing more you could hope for, I think, in a career.