Drug Prices Could be Cheaper, Claims GSK Chief

Prices of medicines should be lower and the high cost of research is a myth, according to GlaxoSmithKline’s boss Sir Andrew Witty.

The pharmaceutical industry should be able to charge less for new drugs in the future by passing on efficiencies within R&D to their customers, according to the chief executive of GSK.

High prices for new drugs, most notably in cancer care, are a rising challenge for healthcare providers, especially in Europe where government budgets are currently under pressure.

Speaking in a conference last week, Witty commented that the $1 billion price tag of R&D, often quoted by pharmaceutical organisations and the ABPI, was “one of the great myths of the industry.”

This is because the $1 billion price tag is an “average figure” that includes money spent on treatments that fail in later stages, costing businesses hundreds of millions of dollars.

“It’s not unrealistic to expect that new innovations ought to be priced at or below, in some cases, the prices that have pre-existed them,” he added.

Sir Andrew also noted that this hasn’t been the case recently within the pharmaceutical industry, “but it is completely normal in other industries.”

Analysing at his own company, he commented that he has increased the rate of return on R&D investment as fewer drugs have failed in Phase III development.

“If you stop failing so often you massively reduce the cost of drug development,” he noted, adding that it’s why GSK are starting to be able to lower their prices.

Average Research & Development Costs

The average cost associated with developing new drugs, including failures, is now $1.1 billion, according to a study conducted by Deloitte and Thomson Reuters last year.

However, the report found that the performance of each individual company varied widely. For the most successful organisation studied, the average cost was only $315 million, while the largest average spend was $2.8 billion.

It is this large variation that Sir Andrew Witty is referring to.  If all pharmaceutical companies could reduce their research and development costs by reducing the number of failures, then these savings could be passed onto healthcare payers.

Overall, the pharmaceutical industry is having greater success rates when bringing new drugs to the market, with 39 new drug approvals in the US last year.

In addition to developments in research, global demand for medicines is increasing and the explosion in the number of products sold in emerging markets should help contribute to lowering the unit costs, Witty noted.


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