* Improved R&D productivity can be passed on as lower prices
* GSK CEO says $1 bln drug development cost a "myth"
By Ben Hirschler
LONDON, March 14 The pharmaceutical industry
should be able to charge less for new drugs in future by passing
on efficiencies in research and development to its customers,
according to the chief executive of GlaxoSmithKline Plc.
"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," Andrew Witty told a conference on healthcare
"We haven't seen that in recent eras of the (pharmaceutical)
industry but it is completely normal in other industries."
High prices for new medicines, most notably in cancer care,
are a growing challenge for healthcare providers, particularly
in austerity-hit Europe where government budgets are under
Traditionally, drug companies have argued that premium
prices are needed to pay for the $1 billion-plus cost of
developing a single new medicine.
But Witty said the $1 billion price tag was "one of the
great myths of the industry", since it was an average figure
that includes money spent on drugs that ultimately fail.
In the case of GSK, a major revamp in the way research is
conducted means the rate of return on R&D investment has
increased by about 30 percent in the past three or four years
because fewer drugs have flopped in late-stage testing, he said.
"If you stop failing so often you massively reduce the cost
of drug development ... it's why we are beginning to be able to
price lower," Witty said.
"It's entirely achievable that we can improve the efficiency
of the industry and pass that forward in terms of reduced
The average cost of developing a new medicine, including
failures, is now $1.1 billion, according to a December study of
R&D productivity among the world's 12 top drugmakers by Deloitte
and Thomson Reuters.
But the performance of individual companies varies widely.
For the most successful company in the group studied, the
average cost was just $315 million, while at the other extreme
one firm spent $2.8 billion.
Overall, the industry is having more success in bringing new
drugs to market, with 39 new drug approvals in the United States
last year - a record only beaten in 1996.
In addition to improvements in research, global demand for
medicines is increasing and the explosion in the volume of
products sold in emerging markets should contribute to lower
unit costs, Witty said.
GSK has for some years adopted a strategy of offering lower
prices in less-developed markets in a bid to balance volume
against price and maximise overall sales.