Europe must pay up for new drugs: Novo Nordisk CEO

NEW YORK Wed May 8, 2013 7:25am EDT

NEW YORK (Reuters) - Europe must start paying more for new medicines and take some of the cost burden of supporting pharmaceutical drug development off the United States, Novo Nordisk's (NOVOb.CO) Chief Executive Lars Sorensen said.

"Europe in general has gotten away with completely underpaying for innovation," Sorensen told the Reuters Health Summit on Tuesday.

Novo's launch in Europe of its new long-acting insulin product Tresiba is going slowly, with the medicine so far available only in Denmark, Switzerland and Britain. Other countries are expected to come on board late this year or next.

It is fully available in Japan, but suffered a major three- to five-year setback in the world's richest market when the U.S. Food and Drug Administration ordered a lengthy heart safety study as a condition of approval.

The Danish company - the world's leader in insulin products for diabetes - is charging more than a 60 percent premium for Tresiba over its main rival product Lantus from Sanofi (SASY.PA), which may be one of the factors keeping the new drug's launch from gaining steam.

Sorensen defended the pricing strategy, saying that the drug was not all that expensive even with the premium.

"It sounds like an awful lot but the daily treatment with Lantus is about $2 in Europe and we are asking for $3," Sorensen said. "The treatment cost in the U.S. is perhaps $4 or $5."

"We're not talking about rheumatoid arthritis or anything like that, it's a relatively modest daily treatment cost," Sorensen said. Treatment with popular biologic rheumatoid arthritis drugs can run in excess of $20,000 a year.

Europe for many years has had price controls in place on medicines that suppress the amount companies can charge.

That stands in sharp contrast to the United States, where the often sky-high prices of new medicines - some cancer drugs can cost more than $100,000 a year and those for rare diseases far more - regularly receive favorable reimbursement decisions.

As a result, U.S. patients and payers have historically been the main source of financial support for the high cost of new drug development.

But with pressure mounting to rein in healthcare costs in the United States, other parts of the world may have to start taking on more of the cost burden.

"If we want to stand up for the innovative industry, we also have to price innovation. The moment we stop pricing innovation the whole model collapses and the U.S. won't be able to continue to fund the innovation," Sorensen said.

"Insulin has been too cheap in Europe," he said.

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(Reporting by Bill Berkrot; Editing by Phil Berlowitz)