GSK chief: What the world needs is 'cleverer' drug pricing

GlaxoSmithKline ($GSK) CEO Andrew Witty (photo) talked drug prices in an interview appearing in the Irish Times. With governments around the world increasingly focused on belt-tightening, Witty acknowledged drug costs have to be controlled. But across-the-board cuts aren't the way to do it, he told the newspaper.

"As the austerity era descends on everyone, this fixation on reducing costs really is obviously apparent," Witty said, adding that constricting prices year after year isn't sustainable. "No business can absorb that," he said. "I don't care where you start, no business can absorb that."

As most pharma executives do when they talk about price cuts, Witty turned the focus to innovation. Pricing pressures will end up hurting pharma's ability to come up with innovative products. Continual price cuts, or excluding drugs based only on cost, won't work long-term.

But what will? Flexible pricing, he said, based on value--reflecting that all drugs don't work equally well in all patients. A "cleverer" way to price drugs that "continues to stimulate us to develop innovative drugs efficient enough not to overpay for the things which don't add anything," would get his support, Witty said. "[E]ven though it might reduce earnings for some companies, and maybe our company from time to time."

Witty also put the onus on drugmakers to get lean, as big mergers have created "a lot of excess capacity" in pharma. "It has become clear that scale is not the key," Witty told the Times. "So I think we are in an era of consolidating in the true sense of the word, not just fewer companies but less capacity."

- see the Irish Times article