Novo Nordisk Annual Report 2021
Contents Introducing Novo Nordisk Strategic Aspirations Key risks Management
Consolidated statements
Additional information
Novo Nordisk Annual Report 2021 55
Section 2
Results for the year
2.1 Net sales and rebates
Gross-to-net sales reconciliation
DKK million
2021
Gross sales
US Managed Care and Medicare
US wholesaler charge-backs
340,180
(112,929)
(40,354)
US Medicaid rebates
(19,810)
2020
298,187 270,431
(96,716) (84,202)
(37,036) (33,772)
(17,307) (14,365)
2019
Other US discounts and sales
returns
(14,119)
(10,867)
(8,280)
Non-US rebates, discounts and
sales returns
(12,168)
(9,315)
(7,791)
Total gross-to-net sales
adjustments
Net sales
(199,380)
140,800
(171,241) (148,410)
126,946 122,021
Provisions for sales rebates
DKK million
2021
At the beginning of the year
Additional provisions, including
increases to existing provisions
Amount paid during the year
34,052
2020
30,878
2019
25,760
155,602
(141,370)
111,921
(106,116)
102,782
(98,655)
Adjustments, including unused
amounts reversed during the year
Effect of exchange rate adjustment
(284)
166
381
2,822
At the end of the year
50,822
(2,797)
34,052
610
30,878
Sales discounts and sales rebates are predominantly issued in the US. As
such, rebates amount to 75% of gross sales in the US (74% in 2020 and 71%
in 2019).
Provisions for sales rebates include US Managed Care, Medicare, Medicaid,
and other US rebate types, as well as rebates in a number of European
countries and Canada.
Pricing mechanisms in the US market
In the US, sales rebates are paid in connection with public healthcare
insurance programmes, including Medicare and Medicaid, as well as rebates
to pharmacy benefit managers (PBMs) and managed healthcare plans.
Key customers in the US include private payers, PBMs and government
payers. PBMS and managed healthcare plans play a role in negotiating
price concessions with drug manufacturers for both the commercial and
government channels, and determine which drugs are covered on their
formularies (or 'preferred drug lists').
US Managed Care and Medicare
For Managed Care and Medicare, rebates are offered to a number of
PBMs and managed healthcare plans. These rebate programmes allow
the customer to receive a rebate after attaining certain performance
parameters relating to formulary status or pre-established market share
thresholds. Rebates are estimated according to the specific terms in each
agreement, historical experience, anticipated channel mix, growth rates and
market share information. Novo Nordisk adjusts the provision periodically to
reflect actual sales performance. Managed Care and Medicare rebates are
generally settled around 100 days from the transaction date.
US wholesaler charge-backs
Wholesaler charge-backs relate to contractual arrangements between Novo
Nordisk and indirect customers in the US whereby products are sold at
contract prices lower than the list price originally charged to wholesalers.
Since January 2021, Novo Nordisk has changed its policy in the US related
to the 340B Drug Pricing Program, whereby Novo Nordisk no longer
provides 340B statutory discounts to certain pharmacies that contract
with covered entities participating in the 340B Drug Pricing Program.
Chargebacks are estimated using a combination of factors such as historical
experience, current wholesaler inventory levels, contract terms and the
value of claims received but not yet processed. Wholesaler charge-backs are
generally settled within 30 days after receipt of claim. Please refer to note
3.4 Provisions and contingent liabilities for a more elaborate description of
the ongoing litigation on the 340B Drug Pricing Program.
US Medicaid rebates
Medicaid is a government insurance programme. Medicaid rebates have
been estimated using a combination of historical experience, product and
population growth, price changes, and the impact of contracting strategies.
The calculation also involves interpretation of relevant regulations that are
subject to changes in interpretative guidance from government authorities.
Novo Nordisk adjusts the provision periodically to reflect actual sales
performance. Medicaid rebates are generally settled around 150 days from
the transaction date.
Other US and non-US discounts and sales returns
Other discounts are provided to distributors, wholesalers, hospitals,
pharmacies, etc. They are usually linked to sales volume or provided as cash
discounts. Discounts are calculated based on historical data and recorded
as a reduction in gross sales at the time the related sales are recorded. Sales
returns relate to damaged or expired products.
Other net sales disclosures
In 2021, Novo Nordisk had three major wholesalers distributing products in
the US, representing 18%, 13% and 13% respectively of total net sales (19%,
13% and 12% in 2020 and 19%, 14% and 12% in 2019). Sales to these three
wholesalers are within both Diabetes and Obesity care and Biopharm.
Net sales to be recognised from fulfilling existing customer contracts
containing fixed or minimum sales volumes, with an original term greater
than 12 months, are expected to be DKK 1,012 million within 12 months
(DKK 431 million in 2020) and DKK 962 million thereafter (DKK 216 million
in 2020).
Novo Nordisk's sales are impacted by exchange rate changes. Refer to
note 4.3 for development in key exchange rates.
Accounting policies
Revenue from sale of goods is recognised when Novo Nordisk has
transferred control of products sold to the buyer and it is probable that
Novo Nordisk will collect the consideration to which it is entitled for
transferring the products. Control of the products is transferred at a single
point in time, typically on delivery. The amount of sales to be recognised is
based on the consideration Novo Nordisk expects to receive in exchange for
its goods. When sales are recognised, Novo Nordisk also records estimates
for a variety of sales deductions, including product returns as well as rebates
and discounts to government agencies, wholesalers, health insurance
companies, managed healthcare organisations and retail customers. Sales
deductions are recognised as a reduction of gross sales to arrive at net
sales, by assessing the expected value of the sales deductions (variable
consideration). Where contracts contain customer acceptance criteria,
Novo Nordisk recognises sales when the acceptance criteria are satisfied.
In some markets, Novo Nordisk sells products on a sale-or-return basis.
Where there is historical experience or a reasonably accurate estimate ofView entire presentation