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Mumbai: The pharmaceutical industry across the world is facing a price squeeze with a number of developed countries taking steps to reduce overall spend to tide over the economic crisis. “Value pricing is gaining importance across the globe, with the French government being the latest to squeeze different types of expenditure, including pharma,” said Simon Friend, a global pharmaceutical industry leader at PricewaterhouseCoopers (PwC). The industry has been a prime target of these cuts and has not been very good at articulating the benefits of its products across the health value chain, he said.
The pricing squeeze has been an addition to other critical issues in the industry, including lack of innovation, impact of generics and regulatory issues. This has led companies to rationalise costs within the organisations, be it in sales & marketing, manufacturing or R&D. Viewed in this light, the benefits for India would be in areas of outsourcing and clinical trials, Friend said.
However, when it comes to quest for innovative products, there is very little that can be done in terms of driving out costs, said Steve Arlington, global pharmaceuticals and life science advisory services leader at PwC. Some of the large organisations spend $8-10 billion a year on R&D, so the cost of innovative drugs will naturally be high. But costs can be pruned in generics or diagnostic instruments producers, by looking carefully at various processes, supply chain, tax regimes or back offices, Arlington said.
Biosimilars (generic versions of biotech drugs) can help lower costs, but even then they cannot reach rock-bottom prices that chemistry-based generics can. Some of the largest biotech companies in the world are transforming. Amgen, once the world’s biggest biotech company, is now a fully integrated pharmaceutical company. Genentech, the second largest, is now a part of pharma major, Roche. The boundary between pharma and biotech is narrowing. “After the acquisition of Wyeth by Pfizer, what we see is formation of a biopharmaceutical company,” Arlington said. However, it will be long before biopharmaceuticals can be manufactured at lower costs to be marketed in countries that cannot afford high costs of medicines, he added.
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