GSK tries novel approach in emerging markets: price cuts

CFO Simon Dingemans

GlaxoSmithKline ($GSK) CFO Simon Dingemans has found one of the mainstays of retail works just fine for drugs, particularly in emerging markets where GSK wants to build its foothold. You just put them on sale.

"Price reductions are in many ways very important in driving the access and take-up of health-care coverage," Dingemans, who was in Beijing, China, told Bloomberg. "We see very good volume response to that, which shows the strategy is working."

For example, unit sales of Avamys nasal spray for allergies have increased 5 times since a price cut for emerging markets four years ago, while revenue from its enlarged prostate treatment Avodart have swelled 76%. GSK's sales in China were up 20% to 1 billion pounds ($1.52 billion) last year and up 5.6% to £1.56 billion ($2.4 billion) across all emerging markets. That was 3.8% of its total revenue, Bloomberg said.

Drugmakers recently were warned by China's former Minister of Health Chen Zhu that government is going to expect discounts from drugmakers who want access to its huge market. Novartis ($NVS), for one, recently worked a deal where it will give the government three doses of cancer med Gleevec free for every dose it buys. That way, the annual cost is discounted to $12,000 from $77,000, but Novartis escapes having the lower price used in automatic price cuts in other countries that peg their prices to China.

GSK is using the same price cutting scheme in 40 African nations and 10 in Asia, with the idea that it will be able to build its reputation in those markets and cash in on that when the countries develop economically.

- read the Bloomberg story

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