Novartis, Roche Playing Hardball With U.K.

Includes: NVS, RHHBY
by: Derek Lowe

Now, here's some hardball negotiating: Roche (RHBBY.PK) and Novartis (NYSE:NVS), fighting with the UK government over drug pricing and regulations on clinical trials, are threatening to pull their R&D out of the country.

The Swiss drug companies made their threats known in personal meetings with a government minister, according to Whitehall documents seen by the Guardian.

The documents also make clear that cabinet ministers have been conducting a vigorous charm offensive to prevent multinational drug companies leaving Britain. Novartis employs 3,500 people in Britain at nine sites while Roche has 1,500 workers in this country.

The ministers, including business secretary Lord Mandelson, have in recent months visited executives at their headquarters in Japan, the US and Europe in what officials call a "programme of ministerial visits".

The visits have been organised to patch up a relationship strained by ministers' efforts to force the firms to cut the prices of the drugs they sell to the NHS, according to the documents.

In any of these "according to documents obtained by. . ." cases, you have to ask cui bono? Roche and Novartis have not made these threats publicly, so this could be a leak from them to apply more pressure to the government. Or it could be a leak from inside the NHS, in order to make the companies look bad. I would be inclined to not pay attention to any of the public statements on this issue from either side - the real story will take place out of the headlines, unless someone spills some more meeting minutes.

Either way, I think it's unlikely that this would be followed through - but neither is it completely impossible, either, which is what makes it a reasonably effective move.