Novo Nordisk (NYSE:NVO) shares fell more than 5% yesterday, following a lawsuit alleging that the Danish diabetes giant made misleading earning forecasts and comments from the President-elect regarding drug prices.
The securities class action lawsuit against Nordisk also named Eli Lilly (NYSE:LLY), Sanofi (NYSE:SNY) and Merck (NYSE:MRK), claiming that Nordisk’s reported earnings and forecasts were inflated through price fixing for the company’s insulin drugs.
The lawsuit on behalf of Lehigh County Employees’ Retirement System alleges that Nordisk “misrepresented and concealed the true extent of the pricing pressures it was experiencing from pharmacy benefit managers.”
“We’re aware of the complaint. It wouldn’t be appropriate for us to comment at this time since we’re evaluating the allegations in the complaint,” Novo Nordisk said in an email to Reuters.
On Wednesday, President-elect Donald Trump said that pharmaceutical companies were “getting away with murder” with what they charge the government for drugs.
“We’re the largest buyer of drugs in the world, and yet we don’t bid properly,” he said, in his 1st press conference since November. “We’re going to start bidding, and we’re going to save billions of dollars over a period of time.”
His comments sent U.S. drug stocks tumbling.
“This is a double whammy for Novo Nordisk today, and both factors are behind the share price reaction,” analyst Michael Friis Jorgensen from Alm. Brand Bank said, according to the news outlet.
In December, Sanofi sued Nordisk for “misleading” marketing materials that claim Sanofi’s insulin drugs Lantus and Toujeo will be “blocked” by U.S. pharmacy benefit manager CVS Caremark in January and that patients should switch to Nordisk’s Tresiba.
CVS is replacing both Sanofi’s and Nordisk’s drugs with Eli Lilly’s Basaglar on its standard formulary, but Sanofi said that many health plans don’t follow CVS’s standard list and even those that do will probably continue to cover the company’s drugs.
In the same month, Nordisk president Jakob Riis said that the company will limit annual price hikes of its products’ list prices to single-digit percentages, joining Allergan (NYSE:AGN) CEO Brent Saunders who released a “social contract” 3 months ago with the same goal.
“We hear from more and more people living with diabetes about the challenges they face affording healthcare, including the medicines we make. We take this issue seriously and have been thinking about what we can do to better support patients,” Riis wrote in a statement. “This has become a responsibility that needs to be shared among all those involved in healthcare and we’re going to do our part.”