Drugmakers are chafing under European price cuts. But more and more, they're cutting prices on their own in the developing world. It's part of the strategy to increase emerging markets sales, a recognition of the fact that developing countries, a., can't afford drugs at the prices charged in U.S. and Europe, and b., present very different tactical challenges.
Roche ($RHHBY) is the latest mover: The Swiss drugmaker has cut the price on its MabThera cancer treatment by one-half in South Africa. The move will immediately increase volume, Business Day says.The government hasn't been able to afford routine use of the pricey drug, which treats lymphoma, leukemia and rheumatoid arthritis. Now, more patients can get it.
It's similar to price cuts from GlaxoSmithKline ($GSK), Sanofi ($SNY), Merck ($MRK) and Pfizer ($PFE) in a variety of countries. The French drugmaker has said it will drop some prices by as much as half in some places, while Glaxo is making cuts of as much as 75% in the poorest countries.
Selling lower-priced drugs at higher volume is the way to go in certain emerging markets, they say. It's more profitable than a trickle of sales at higher prices. Patients in those countries often bear a larger burden of drug costs; sometimes, they have to pay full freight. And state payers just can't afford to shell out as much as governments elsewhere.
Glaxo's emerging markets chief has put it this way: "My preference is not a high price and 100 units of profit for 100 patients, but to drop the price and make 100 [units] of profit from 500 patients."
Among the cuts: Sanofi slashed prices on its diabetes drug Lantus and its cancer treatment Taxotere in the Asia-Pacific region, including Indonesia and the Philippines. Japan's Eisai slashed the cost of its Alzheimer's drug Aricept in 6 Asian countries. Glaxo rolled out 40% to 50% price cuts in Kenya, including its asthma medication, Avamys. (After a 40% cut, Avamys sales grew 60%.)
- see the Business Day piece