Novartis Q1 Earnings Miss as Medicare Price Cuts and Biosimilar Competition Take Hold

Novartis reported lower-than-expected Q1 2026 earnings, primarily due to new U.S. government-negotiated drug prices and increased competition.

The main hit came from a significant price cut on its blockbuster heart failure drug, Entresto, which took effect on January 1, 2026, as part of the Medicare program.

This pressure was amplified by competition from biosimilar versions of its drug Xolair and a high base for comparison from the previous year.

Novartis reported first-quarter 2026 results that fell short of market expectations.

The primary reason for this earnings miss was a significant, policy-driven event in the United States. On January 1, 2026, the U.S. Medicare program implemented pre-negotiated prices for a select group of drugs, and Novartis's blockbuster heart failure medication, Entresto, was on that list. The government-set “maximum fair price” effectively cut Entresto's price by over 50% for many patients. This policy change directly translated into a substantial revenue shortfall for the company, aligning closely with the overall miss of about $500 million in quarterly revenue.

Secondly, this pricing pressure was compounded by intensifying competition. The company faced growing erosion from biosimilars—near-identical copies of biologic drugs—for its asthma and allergy treatment, Xolair, particularly outside the U.S. Management had already signaled that 2026 would be a challenging year due to a major Loss of Exclusivity (LOE), meaning key patents were expiring, opening the door for generic competition. These competitive headwinds amplified the impact of the Entresto price cut.

Finally, the comparison to the previous year was particularly challenging. In 2025, Novartis's results were boosted by certain one-time