LONDON (Reuters)—Pharmaceutical companies cannot depend on ever increasing prices in the U.S. and will need to find a new balance between incentives for innovation and access to medicines, according to the chief executive of GlaxoSmithKline.
High drug prices have come under fierce political fire recently in America, the industry’s biggest and most profitable market, with Democratic presidential candidate Hillary Clinton attacking “excessive profiteering.”
Worries about the fall-out have unnerved investors, triggering a sell-off in many pharmaceutical and biotech stocks, particularly those reliant on price rises to drive a large proportion of sales growth.
“Clearly pricing has become a big focus point in the last few months,” GSK CEO Andrew Witty said after reporting third-quarter results.
“It is difficult to predict what exactly, if anything, will happen in the legislative environment. However, the market itself, regardless of legislation, is beginning to create more price pressure and negotiation points than we have seen in the past.”
Witty argues his company is well placed in the looming pricing crunch, following its move to shift emphasis towards selling more affordable consumer health products and cheaper medicines.
That strategy included a decision to sell its high-margin marketed cancer drugs to Novartis, prompting scepticism among some investors who questioned the logic of exiting one of the hottest areas of medicine.
Excitement about a raft of pricey new drugs for cancer and other serious diseases has been a major driver of pharma and biotech stocks in the last three years, although Witty cautioned the good times would not necessarily last.
“While the industry has been through a nice purple patch for the last two or three years, it is quite hard to conclude that that purple patch will continue in perpetuity,” he said.
The challenge for the future would be to develop a more sustainable pricing strategy that balanced the need for investment incentives with the requirement that medicines be made available to people from all income groups, he said.