Pricing pressure in US will continue: CEO GlaxoSmithKline Plc

British drug maker GSK's global CEO Sir Andrew Witty will step down next March after eight years

British drug maker GlaxoSmithKline PlcAndrew  (GSK)’s global CEO SIR ANDREW WITTY will step down next March after eight years at the helm. Witty, who oversaw the change in commercial strategy in the company, was in India to participate in India-UK business events. He interacted with media in Mumbai on a series of issues. Excerpts: 

Q) US presidential election results will be announced on Wednesday. What impact will the result have on big pharma companies ?
 

A) Since the launch of the Affordable Care Act in the US, we have seen an acceleration of consolidation in health care between insurance companies and hospitals. In many parts of the US, you will not find an independent doctor. They all belong to corporate organisations and that creates much more negotiating power in the system. There’s plenty of pricing pressure in the US. Whether or not the new government does anything, you will not see a deceleration of price growth in the US. You will see more of that (price) behaviour.

Q) You have said that drug companies need to show more empathy and not defend abnormal price hikes. What is your view on price hikes?

A) I’m not going to comment on specific cases. But, as a general point, I’ve been on record to say that industry needs to take a much more balanced and thoughtful view on how it makes its pricing choices to ensure access to medicines. There are other ways to achieve good returns without just being fixated on price. You can drive volumes and that’s exactly the strategy we’re adopting at GSK. It’s a shame that over the past 10 years people have equated success of research and development (R&D) with high price of drugs. The right marker of R&D is whether a large number of people benefited from it. Eight years ago, we announced a target of 14 % return from R&D activities and we have now achieved 13 %. With this, we know how to work towards the 14 % return, to work out the price and volumes and not just look at the highest price. 

Q) You were part of India-UK CEO forum meet in New Delhi. Was there a discussion on improving health-care access? 

A) There was a discussion on health care. I think there is tremendous opportunity for both the UK and India to collaborate more on regulatory harmonisation. This can bring benefits to both people and companies in India. There have been issues with some of the factories in India falling short of regulatory standards and I think there’s opportunity for improvement for all companies.

Q) Are you comfortable with the regulatory environment in India?
 

A) In terms of drug-pricing control orders, it would be great to have more warning before the decision. I’m not arguing with the decision (to cap price). The reason I’m saying so is because we’ve seen demand of products jump 45 % after the price is cut by 20 %. The problem arises when we don’t have supply to cater to the demand, leaving patients frustrated. A bit more predictability (on the part of government) will help. 

Q) GSK changed its commercial strategy as it stopped paying doctors for speeches and de-linked sales targets and medical representatives’ incentives. How has the strategy worked?

A) The best measure of success can be seen from the sale of our new products. In the same period, when we made the changes in business model the sale of our new products took off. One dollar out of every four we earn worldwide comes from new products. We are competing against some of most aggressive companies and we’re winning market share. Our medical representatives are saying ‘please do not get back to the old model’. Overall, the response of physicians is positive. We have added multi-channel communication allowing doctors to connect with us whenever they need. One in every third doctor in India has signed up with us for multi-channel communication.

Q) GSK has committed to developing vaccines for Ebola-like threats. Please share the details...

A) We made a proposal to governments and other organisations where we prepare to dedicate one of our facilities to permanently research Ebola-like threats. We believe we can develop vaccines in four or five years, take them to mid-stage development and put them on shelf. So, if there is a crisis, we’ll be ready. We have made the commitment. We are determined to do it and I hope other companies, too, will contribute to it.