Australia 'free-riding' and engaged in 'commercial blackmail'

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Australia and New Zealand are 'free-riding' off American innovation and engaged in "commercial blackmail" according to Pfizer CEO Ian Read.

Mr Read directed the criticism, which also included Canada, the UK and other government-funded monopsony reimbursement systems, during a recent speech to the National Press Club in Washington DC.

The Pfizer boss promoted industry's success in developing new medicines and defended its pricing practices on the back of research showing the cost of drug development has soared to US$2.6 billion.

“Pfizer spends $8 billion a year on research and development,” he said. “We were lucky if we produce three drugs a year. I don’t need the study to know what it costs to bring new drugs to society in today’s environment.”

“We’re producing great value for society and simultaneously taking large financial risks due to the uncertainty of the drug,” said Mr Read.

The industry's pipeline has never been more promising, he said, pointing to a majority of new molecules being first-in-class innovations. Mr Read also highlighted industry's investment in R&D, which topped US$58 billion last year, comparing it favourably to other industries.

He challenged the claim regularly levelled at industry that its returns are too high, saying the average pharmaceutical company return on capital of 11 per cent is "not that healthy".

He then turned his attention to the need for governments to back the creation and maintenance of policies that support innovation, including tax, trade, intellectual property and reimbursement.

In response to a question, he turned to Australia, New Zealand and Canada, accusing the countries of rationing access to medicines and not contributing to the cost of innovating.

“...if you look at Canada, if you look at Australia, if you look at New Zealand, all highly developed countries, all free-riding on inventions in the United States."

He continued, "If you look at access for their populations...if you say there were 100 new products authorised in the United States - Australia and New Zealand, their population only has access to 30 per cent of them. The UK has access to 47 per cent of them, normally 2-3 years later than the US. Their citizens are not getting quality health care."

Mr Read essentially likened national monopsony pharmaceutical purchasing systems, like the PBS, to US government programs. He argued industry offered concessional pricing to these US government programs on the basis it could generate adequate returns in the US from the private sector. Mr Read added any action to extend concessional pricing in the US to private payers would only undermine industry's ability to offer if it in the first place, and innovate.

As for national systems, he said, "It's an oxymoron to say you negotiate with governments, you don't negotiate with governments; you take what they offer you if you already have all your investment sunk."

"Without the US market, there would not be the tremendous expansion in the innovative therapies that are available today and will be available in the future," he said.

Mr Read said the solution was good trade agreements that "protected" intellectual property.

In response to a question about the Trans Pacific Partnership (TPP), recently scrapped by US President Donald Trump, he said Pfizer did not support the agreement because it did not include good provisions on intellectual property.

The research-based sector was disappointed the TPP did not include an extension in the data protection period for biologic medicines.

"As an industry our investment is sunk upfront. You're not paying for the pill. The pill is an artefact. What you're paying for is all the clinical trials, all of that knowledge, all of the experimentation, which tells you that pill will do what it will do. The pill is irrelevant - it's just a way of getting that into your body.

"So, once you've done all that work, you're very subject to commercial blackmail because you need to try and recover as much money as you can from the sale of that intellectual property, and therefore you're forced by monopsony purchasing governments who say, well, I know you get $100 in the US, and that's a market-based price, but we're not going to give you access to our market at all.

"You have a choice. You can either say, no, in which case you get no funds to support your research, which mean prices go up more in the US. Or, you say, ok, what can I negotiate."

Mr Read slammed the UK for offering "pennies on the dollar" for the company's new breast cancer therapy IBRANCE (palbociclib). "It's a huge advance," he said, describing it as "incredible" but that the company had said "no" and "walked away".

The Pharmaceutical Benefits Advisory Committee considered IBRANCE at its most recent meeting.

"You cannot negotiate with governments," added Mr Read.