Pharma wheels and deals in Europe as austerity wears on

No question about it, Europe has become the slough of despond for drugmakers aiming to preserve their margins. But sometimes, desperation spawns creative solutions. With austerity putting the squeeze on prices all over the continent, drugmakers are turning to the sort of discounts and money-back offers we associate with end-of-season clearance sales.

As the Economic Times reports, Big Pharma and its smaller brethren are striking deals with government payers: 50% discounts; buy some, get some free; money-back guarantees; and the like. It's not entirely new; companies such as Johnson & Johnson ($JNJ), Novartis ($NVS), and GlaxoSmithKline ($GSK) have negotiated pay-for-performance and risk-sharing deals with cost-effectiveness watchdogs in the U.K. and Germany, for instance.

But experts tell the Times that the practice is growing, partly to avoid a reference-pricing cascade around the continent. "It is spreading pretty quickly," Patrick Flochel, global pharmaceuticals leader at Ernst & Young, told the Indian paper. "There is a big push everywhere with healthcare reforms."

If drugmakers cut list prices publicly, then other countries that peg their own prices to those elsewhere will slash their reimbursement rates. Pay-for-performance deals and creative discounts don't have the same effect, for two reasons. One, their details aren't often made public. Two, even when details are known, it's tough to put a figure on the actual cost, particularly with money-back guarantees and results-based pricing.

"Global companies do not want their list prices to drop because that will have a knock-on effect as different countries increasingly reference each other over drug prices," Brian Godman, a researcher at Sweden's Karolinska Institute, told the Times. "The only way round that is for companies to enter into some form of arrangement with the authorities."

- see the Times piece