Just why would Novartis pay $11 billionÂ for one-fourth of an eye-care company and promise another $28 billion for another big chunk? The Wall Street Journal asked CEO Daniel Vasella (photo)Â just that. You've heard some of the reasons Novartis wanted Alcon: aging population, meaning more people with eye-care needs; and diversification. Here's another: The lack of pricing pressure on eye products. While insurers and government healthcare systems are twisting drugmakers' arms for pharma discounts, consumers typically are paying for the kind of eye-care products Alcon sells. "You can pass on price increases easier," Vasella said. "As soon as you get into regulated markets like pharma, it's more difficult."
And there lies the rub for much of the drug industry right now. Vasella predicts that pharma prices on the whole will decline--unless and until R&D innovation declines. "[T]hen society will have to make a decision: Do we want innovation or not?" he says.
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