Moneycontrol
Nov 09, 2016 12:00 PM IST | Source: CNBC-TV18

Expect drug pricing pressure to continue in next few years: GSK

The US market is seeing a shift in market dynamics and several factors lead to drug product pricing and there will be further pricing pressure over the next few years, said GSK Global Chief Executive Andrew Witty.


While pharma analysts believe that a Democratic win in the US presidential election will have a negative impact on drug pricing control, GlaxoSmithKline’s management believes pricing pressures will continue over the next few years irrespective of the candidate in charge at the White House.


Even though it is too early to predict the implications a new US President will have on the US pharma market, it would be unwise to forget that the US marketplace is very innovative, said GSK Global Chief Executive Andrew Witty. 


The US market is seeing a shift in market dynamics and several factors lead to drug product pricing and there will be further pricing pressure over the next few years, Witty said. He said that the US will remain a pro-innovation market, but it needs to make sure the balance between the pricing of generic and innovative drugs is correct.


Already the market is witnessing a deceleration in branded drug pricing and GSK is focussed on responsible pricing approach, he said.

With just a few hours before the US elects its 45th President, it is still a tight race between Democratic contender Hillary Clinton and  Republican contender Donald Trump for the White House.

Below is the verbatim transcript of Andrew Philip Witty's interview to Ekta Batra on CNBC-TV18.

Q: The US election that is the big thing we are going to have a new president in the United States just in the next couple of hours. There is a lot of rhetoric by Clinton on generic pricing, do you think that a win by Hillary Clinton if in case that does happen is going to change the dynamics of the US industry to that extent?

A: We will obviously have to wait and see over the next 24 hours what the results are going to be and I am sure then over the next few months as we head towards the inauguration and afterwards, we will start to see what the real policy dimensions are of the new administration. I think it is way too early to really be certain of what might happen.

I do think it is fair to say that we have seen over the last 2-3 years a shift in the market dynamics more generally, so it is very obvious that we should focus on the political dimension and potential implications of the changing politics, but actually one of the things we should not forget is the US market place is itself very innovative and a lot of the pressures that we see on pricing is coming through some of the changes there, so the consolidation for example of the payer marketplace, the way in which positions are now typically part of big corporate organisations all of those things are having their own influences on pricing as well.

Q: So it doesn't matter or it will just probably increase the amount of pricing pressure that we will see, if in case it is the democratic win, but are the dynamics of the US industry changing significantly say from what it was 5 years ago, 5 years hence we are going to see increased amount of pricing pressure in the US market and hence there is a change that we are fundamentally working with irrespective of the president?

A: First of all I think the US is going to remain a very pro-innovation market place, I can't see any scenario where the US isn't a country which is looking for new breakthrough medical innovations. I do think it will be increasingly focussed on making sure that for example in the generic sector there isn't unnecessary profit.

So, you have to really go back to the fundamental premise of the US marketplace, it pays relatively high prices of new medicines or new technologies, but in return for that it expects that at the end of the patent life that those generic prices will be low for ever and that really the trade off, that there is an upfront loading of the pricing in return for long term low generic prices.

I think there will be pressure to try and ensure that that model is in fact working in the market place. Secondly, there is bound to be ongoing discussion about what the right price level should be in the first case and of course that is some of the things, we are already starting to see in the market place with some of the negotiating dynamics which are opening up and I think there will be more pricing pressure over the next few years. I don't see a scenario where it will get less difficult then it is today.

Q: In that sense say for example what happen with Mylan and the EpiPen issue as well as Gilead's Hep C pricing in the US markets as well as with Turing Pharma. Do you think that maybe with a Clinton win these kinds of issues are just going to get highlighted increasingly and hence branded drugs could also see maybe corrective pricing or maybe some amount of rationale pricing?

A: I think first of all we are already seeing some changes in pricing. We are seeing a deceleration of branded drug price growth in the United States for sure. I am sure all companies are thinking about their pricing structure. If I look at GSK for the last 3 years we have been launching new products, they now represent 25 percent of our sales, the highest ratio of innovation of anybody in pharma. However all of the products we have launched most recently, we have launched at or below the prices of the older technologies that we are looking to replace. We have already moved into different space and if you look our overall American business in the 9 months year-to-date, our pricing level is down 2 percent. So,  we are already seeing that negative price evolution and we are managing well within that. We are focussed very much on that responsible pricing approach.

Q: Don't you think that inherently that is going to curb innovation say generic pricing becomes more competitive or it is branded generics which become more competitive in the US markets, that eventually going to curb pharma company's motivation to go out and spent 10 percent of their sales in R&D or higher and create a drug where they can't freely price especially in the US market?

A: Well, I don't think we should mix up the generic pricing with the innovative pricing. In fact, the lower the generic prices are, the more capacity is released to fund innovation, so I don't think there is a direct link there and I think there is an opportunity in the US to ensure that the balance between generic and innovative pricing is correct and hasn't slipped. I think that is quite important.

If you look at the overall pricing dynamics of the US, it is also worth remembering that 80 percent of the prescriptions are already filled by generics. So, most of the volume is already filled by generics, which is why those prices have to be low, they have to be because that's where the bulk of the market is. If you look at company like GSK, what drives our interest in research isn't the price, it is the returns. So, if we can find the balance where a reasonable price give us access to significant volume, obviously that generates return to pay for the R&D and that has been very much the strategy of GSK.

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