GlaxoSmithKline’s Moncef Slaoui has an interview in the Philadelphia Inquirer, and he’s responding to critics of the company’s strategy (and to rumors about it):
Slaoui suggested some reality for pharma cheerleaders: First, most Americans think drug prices are way too high and sooner or later the bottom will fall out from those firms trying to milk the big profits. Second, high-priced drugs that treat only a few patients and claim a disproportionate share of national health spending will cripple the broken system even faster.
“Our conviction – with the board, [CEO] Andrew Witty and the other executives – is that the current pricing model is unsustainable in the long run,” Slaoui said. “We need to prepare ourselves to be an equally profitable business by shifting a little bit the volume-price equation. It doesn’t mean we only do non-innovative products. Not for a second. . .
As for pricing, he’s probably right – up to a point. The industry certainly can’t charge whatever it wants for whatever it puts on the market, but the hope is that innovative treatments can justify high prices. After all, these prices are already set based on what the companies involved think that insurance companies and government plans will accept. I think that pricing pressure, though, should slide along the scale of usefulness and innovation, because I think that there should be a reward for taking the greater risk of breaking new ground.
But when you talk about usefulness, you run into some very hard decisions very quickly, as outlined in this post on cancer drug costs. What are the benefits of a new drug, and what are they worth? Another part of the article lays that out:
Gilead Sciences has been criticized because its hepatitis C drugs, Sovaldi and Harvoni, have 12-week price tags of $87,000 and $95,000. But they almost always cure the disease, eliminating the need for costly liver transplants. Merck’s Keytruda and other new high-priced immunotherapy cancer drugs often only slow tumor growth in a tiny group of patients. Keytruda is approved so far only for advanced melanoma, which has 76,000 new patients a year.
“From a pricing standpoint, we really need to be aware that a very small percentage of patients in the U.S. consume a very large percentage of the cost of health care for a benefit that is expressed in months to prolong survival,” said Slaoui, who trained in immunology.
Indeed. Curing advanced melanoma would be a wonderful thing, but we can’t do that yet. All we can offer right now – and that’s been hard enough – are a few more months (for some people, and we’re not always sure which ones, up front). So with the current situation,a lot of money gets spent near the end of life (and not just on drugs, mind you, not by a long shot), and it buys. . .some extra time. Which is worth. . .well, what? No one wants to answer that question, not for anyone else, and not for themselves.
Outside this big questions, this article has particular relevance for GSK, who have recently been shifting towards high-volume lower-margin areas (thus the defensive tone of some parts of the interview). Here’s the take on that over at FiercePharma, and it points out that if this strategy doesn’t show clear dividends, in a relatively short period, the company’s board may not continue to buy into it.