The Cost of Innovation - Pharmaceutical Executive


The Cost of Innovation
Highlights from "Large Molecules, Large Dreams: A Forum on Global Drug Pricing and Sustainable Medical Innovation," held August 12, 2004, at MIT's Sloan School of Management.

Pharmaceutical Executive

The ill of a monopoly is tied to the inability to price discriminate. And that's the center of this discussion. The issues are how to deal with the fact that we are rewarding innovation with something we don't really like—monopoly power—and how to limit the bad effects of that in the best possible way. Specifically, how do we move away from uniform pricing, which is inefficient, and go to other mechanisms?

The Price of Free Drugs David Meeker

President, LSD Therapeutics, Genzyme

Genzyme works in the area of ultra orphan diseases — conditions that affect fewer than 10,000 individuals. The product around which the company was more or less founded is an enzyme replacement therapy for Gaucher's disease. We currently treat fewer than 2,000 individuals in the United States. The price of therapy is $150,000-$200,000 per patient, per year, an extraordinary cost.

David Meeker
It's a rare disease. Patients, physicians, and payers know little about it. You need to help create awareness; create education; make sure there are centers of excellence where patients can go to get evaluated and diagnosed, and to get appropriate therapy, whether enzyme replacement or something else.

The problem is that there is such a small population available to recoup costs. If there were 100,000 patients with Gaucher's disease, the cost of that therapy would be proportionately less. But if you go to ministries of health around the world and start to discuss pricing, they say, "Tell me what the price is in six other countries," and invariably those are the lowest-priced countries. And the negotiation goes, "Okay, we want the lowest price," or "We want the average of the lowest-priced countries."

The position we've taken is that the fairest approach is to establish one price and maintain that price to the best of our ability. We recognize our commitment to areas of the world where patients aren't able to pay, but our response to that is not that we're simply going to give free drugs to those countries. Rather, we're going to help individual patients to the maximum extent we can, but we're going to work on developing a healthcare system that can eventually assume full responsibility for those patients.

What I'm looking for when I'm having discussions with these countries is commitment. And the commitment may not be to purchase any drug. It may be that the country is going to invest in a center of excellence or in educational programs, or help the patients get organized. Over time, I expect that most countries we work with—even those in the developing world—will begin to assume some responsibility. So they're paying for the children, we will pay for the adults. They pay for one patient, we're paying for nine patients.

Now is that a 90 percent discount? No, it's shared responsibility, and I think that's an important distinction. You're not in there each year negotiating how much of a discount there will be this year. The discussions are about where we are in our partnership and our shared responsibility. And there's a tremendous pride in these healthcare systems that comes from being able to take responsibility for those patients.

IP Excess Una S. Ryan

President and CEO, Avant Immunotherapeutics

Una S. Ryan
Our model is different from Genzyme's—where you have an orphan drug, a high price, and a relatively small number of people who need the drug and can't afford it. Avant, the company I run, makes vaccines. These are needed on a global basis, so the number of people who need them is very large compared with an orphan drug.


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