Bayer's outgoing chief executive, Marijn Dekkers, used his final annual press conference yesterday to take a potshot at those trying to get innovative drugs on the cheap. Cutting costs will have dire consequences for the pharma industry, he said: “In the long term it will mean that companies can no longer finance their growing research and development expenses. At some point the industry’s innovation strength will be diminished.”
However, with drug pricing now firmly on the political agenda and initiatives like pay-for-performance schemes becoming more prevalent, it might be the pharma companies that have to adapt – or suffer the consequences.
Mr Dekkers did not suggest a solution to the issue, except to say that in Bayer’s home territory of Germany “we need to achieve a new balance that also takes better account of the concerns of the research-based pharmaceutical companies”.
It does not help Bayer’s cause that the link between R&D spend and a drug's price has been disproved many times. Indeed, some of the most notorious names in last year’s price-gouging scandal, including Valeant and Turing Pharmaceuticals, were barely even involved in the R&D of the products in question.
But this did not stop Mr Dekkers pushing for a change to the current state of affairs in Germany, where he said the problem is particularly acute because the prices of new drugs are increasingly being aligned with those of off-patent generics.
Another obvious way for big pharma companies to access innovation is by acquiring promising new companies, but here lies another stumbling block, since the funding environment for these smaller players also needs to be improved to enhance the flow of novel products, Mr Dekkers said.
“Germany needs a venture capital law that gives young companies easier access to start-up capital.”
If a company comes up with a new drug that is 50% better than the standard of care, it should be priced at a 50% premium, Mr Dekkers believes. But the problems come when the older drug has already come off patent, and “because the price has dropped from say €10 to €2, you only get €3 per week for the new drug”.
Mr Dekkers contrasted the situation against the mobile phone or automotive industries, where people are more willing to pay a premium for the latest model.
He concluded: “Nobody in their right mind will be trying to develop a better drug if the comparison price is the off-patent version of the older drug. The real comparison should be the older drug when it was still on patent, before generics.”
Against this critics will undoubtedly point to the relatively low development cost of some current blockbusters, as well as the the fact that pharma rarely proves the benefit of follow-on drugs head to head.