In a recent speech Art Levinson, CEO of Genetech managed to simultaneously state that "the dollars going into health care are going up exponentially….That can’t happen forever. The question is when is it going to implode?" " and to demand that "if developed nations want access to breakthrough medicines, they should have to pay full price". He pours scorn on the tactics of his competitors "I think the drug industry, and I’m speaking largely about big pharma here, is shooting themselves in the foot by allowing people to buy drugs in Canada for as low as 10 cents on the dollar. I almost see it as unconscionable." While the logic may be somewhat contradictory, given that biotech drug prices are as more or less as high abroad as they here, even if the use of global budgeting and a more conservative medical culture means that they’re used far less and so the total revenues from them are far less, the Forbes article called Drug Prices: The Genentech Solution lays out the end-game as far as Levinson’s concerned.
Levinson says that if he had the choice, he would "draw a line in the sand." A country that refused to pay a fair price for a medicine simply wouldn’t get it. Levinson said it’s unfair to allow some countries to get drugs on the cheap just because the U.S. pays a great deal. Moreover, he added, if all drugs were sold at those cut-rate prices, the incentives that drive medical innovation would vanish.
As I suggested in my earlier post on this topic, there’s scant evidence that R&D would dissapear for good if US drug prices came down to closer to the European level, despite what some boneheaded columnists with no understanding of the health care "market" think. There would be less R&D at the margin but it would still be one of the most profitable industries to invest in, and there is plenty of R&D spending in lots of other industries which have lower margins and no exended patent protection. Marketing budgets and pharma executive compensation might also be closer to where it is on other industries too, which PhRMA doesn’t mention quite so loudly for some reason. I suspect that the type of logic big pharma is using to protect it’s pricing strategy, and the associated outbursts like Levinison’s, doesn’t help big pharma in the PR war–which if it bothers to read the papers or watch 60 Minutes it would notice that it is currently losing in a blow-out. Of course TCHB contributor The Industry Veteran is slightly more "colorful" in his analysis, which I print below.
Must a person relinquish 100 IQ points to become a Big Pharma CEO? by The Industry Veteran
It appears that Big Pharma is respnding to public outrage at their pricing by mounting a major PR campaign and by making indignant, f**k-you comments such as those by Genentech CEO Art Levinson. Levinson and Sanford Bernstein ass-kisser Rick Evans apparently want to play chicken with Brazil, India and several other countries by forcing them into compulsory licensing, i.e., patent busting. These two al Qaeda-like fanatics of crony capitalism seem to willfully ignore at least one market principle. Of course, Mr. Levinson should be free to sell his products at a single price around the world — but let him relinquish his rights of patent exclusivity. He can have it either one way or the other. If he desires a government sanctioned monopoly via patent protection, then let him function the way electric companies do and petition a public utilities board for every rate change he desires. Conversely if he wants to exert total control over pricing decisions for Herceptin, Activase, Avastin and his other products, then he must relinquish his monopoly over them. He can’t have it both ways. Levinson, Evans and their dim bulb epigoni have played a transparently rigged game long enough: a free market for you and me, a government sanctioned, government subsidized monopoly for themselves. Say, Art, is that the wolf I hear at the door, or is it the bowed and bloodied apostle of Big Tobacco trying to tell you that it’s the beginning of the end?
(BTW if like me you weren’t sure who the Epigoni were, here’s encylcopedia.com’s explanation).