Drug Costs Factor in Recent Pharma Deals

5 May, 2014, by ClinCaptureTeam

We all recognize that drug cost is becoming ever more important to the future of pharma companies, and not just in Europe where the government decides at what price they will reimburse a new product. Also now cost is a problem in the U.S. where payers and even doctors are becoming more cost conscious.  The push back recently against the high price for Gilead’s HCV drug is a good example of the changing pricing terrain.

Biologics aimed at formerly untreated severe conditions got away with the” through the ceiling pricing” of tens of thousands of dollars because payers were only paying for small population. But as those drugs increased their indications and expanded the  populations served,  that level of pricing was no longer acceptable to payers and patients.

Roger Longman in an interview with the Wall Street Journal “Q&A: What the Deal Frenzy Says About Pharma’s Future” April 22, 2014 identifies the drivers behind the recent Novartis and GSK product deals as helping them get economies of scale that allows them to bring new products to market at a lower cost. Quote “GSK and Novartis are both concerned about the issue of how you prove value. How do you deliver products more cost effectively to patients? It’s a hell of a lot more difficult to justify the investment in a few cancer drugs –which is what GSK was doing – and charge a high price and guarantee a return, than if you already have an oncology franchise, which is what Novartis has been doing.

It only works if you can deliver those products at relatively lower prices thanks to different kinds of economies of scales and have a more viable business as we move into this era of pretty strict cost containment.”

Their moves are anticipated to improve market access for their future new marketed products. It’s old knowledge that it’s easier to get a hospital to buy your new drug if you have a line of products across which to develop a deal for the new addition. A one product company can’t afford to give the buyer a better deal. Development costs can also be lower when costs are spread over several products. See more details here.

–

Reposted from Audrey Erbes’ blog: Audrey’s Network

Audrey’s Network includes Bay Area bioscience professionals from all sectors who are working in broad array of functions in the industry. The group originated, first, with members sourced from Audrey’s UC Extension intensive courses in Bioscience Business and Marketing (now numbering over former 1,250 students), the Syntex Syva Alumni Association, the Bio2Device Group (now has over 1,000 members) and other industry professional groups and individuals with whom Audrey has worked. The mission is to assist industry professionals continue to keep up-to-date in their fields through “sharpening the saw” regularly and building and maintaining a vibrant network.