GSK CEO Calls For Change In Business Model As World Power Moves To Emerging Economies

Witty discussed crucial local subjects like product patent policies, capping foreign direct investments, valuations of pharmaceutical assets and GSK's plans for the Indian market.

MUMBAI - Fifty years from now, the period between 2005 and 2020 may be seen as critical years of change when the world witnessed a fundamental shift in economic power from a model that has dominated the world for the last 250 years to an evolutionary one led by emerging markets rather than Western economies.

That thought was shared by GlaxoSmithKline PLC CEO Andrew Witty, who addressed the 45th Annual General Meeting of the Organization of Pharmaceutical Producers of India - a powerful lobby group of global pharmaceutical companies operating in India.

Speaking to a packed hall that comprised dozens of CEOs from Indian Big Pharma subsidiaries like Novartis Ltd., Pfizer Ltd., MSD India, Aventis India Ltd., Roche India, and Eisai India Ltd., Witty spoke candidly on a wide range of subjects including reshaping discovery research, access to medicines and tiered pricing structures in developing nations.

Witty, who used to run GSK's Asia Pacific business, knows the Indian market well and discussed crucial local subjects like product patent policies, capping foreign direct investments, valuations of pharmaceutical assets and GSK's plans for the Indian market.

The CEO called upon pharmaceutical executives to rise to the challenge and lead a constructive transition phase for the industry, so that in the future "history doesn't have a small chapter that devotes pages on how a successful pharmaceutical industry lost its way and began its downfall."

India Can Lead Industry To Reinvent Itself

"We want to see a chapter written which reads something much more, and says the pharmaceutical industry metamorphosed itself to become relevant to the world," Witty said. "You in India have a phenomenal leverage to lead from the front and come out with answers."

He stressed the need for the industry to continuously reinvent itself to discover effective drugs "relevant to the needs of the people" in a vigorously changing world.

Witty said the world can no longer afford to spend $1 billion to discover drugs: "That figure comes from failures that drive the costs of successes, and so we need to fail lesser number of times and succeed more often," Witty said, appealing for ways to reduce the average costs of discovering new medicines.

For those who do succeed in discovering new drugs, there needs to be a fine balance in making a drug affordable and recouping the costs of research through mechanisms such as patent protection or data protection, he said.

But that balance does not equate to always charging a high price, he added, noting that price is a function of affordability in each society for which the industry works.

"Simply because we have a patent or data exclusivity doesn't make the population rich," Witty said, explaining that U.S. prices are not viable in the rest of the world.

He advocated for a tiered pricing structure, which works when richer countries contribute more to the research challenges than middle income countries, while middle income countries contribute more than the poorest countries (Also see "In India, GSK Takes A Deep Dive To Launch Revolade, Votrient At 75% Price Cut" - Scrip, 25 Jul, 2011.).

"One price across the world is a wrong construct," he explained, asking for more health interventions like vaccines.

Breaking Down Silos

Sharing the example of GSK, Witty said the company runs 38 discovery operations with roughly 30 people in each team. Silos within the organization have been destroyed and the chemistry and biology departments have been cut down, Witty said.

"We have cut off the artefacts of the '80s, and the palaces that we built, and we have gone back to what really works ... brilliant individual scientists from diverse locations that have led to a fall in the average cost of the discovery programs, fall in the headcounts and a higher output."

"Drug discovery simply put is not a function of money; it relates to creativity and having great scientists," Witty remarked.

Foreign Investment In India Should Not Be Blocked

Commenting on proposals to cap brown field investments by global companies in India, Witty rejected the theory that foreign companies that buy Indian companies contribute to price escalation.

"It will be a deleterious signal," he said, if the government blocks foreign investments in Indian enterprises (Also see "Indian Pharma Lobby Begins Fresh Offensive For Cap On Foreign Investments Into Domestic Companies" - Scrip, 2 Sep, 2011.).

However, Witty also said that GSK is disciplined in allocating capital to acquisitions and looks for rational propositions.

"We are here in a very big way and we don't have to pay a specific premium to enter the market," Witty said, answering a specific question from PharmAsia News. He said GSK would not do a deal if the price is too high and will stay away from offering aggressive premiums.

GSK, in fact, recently lost out to Sanofi SA in a bid for Universal Medicare Pvt. Ltd.'s Indian nutraceutical businesses, according to industry watchers (Also see "Long Search Ends For Sanofi As It Buys Universal Medicare's Nutraceutical Brands In India" - Scrip, 24 Aug, 2011.).

Witty said he is interested in bolt-on acquisitions in the $1 billion - $2 billion range. He also noted that India remains a vibrant marketplace for GSK, highlighting the strength of the company's Horlicks brand in India (Also see "Novo Ramps Up In China, Roche Downplays Branded Generics, GSK Talks Up Japan While Hitting "The Inflection Point": Emerging Markets Round Up (Part 2)" - Scrip, 11 Aug, 2011.).

Vikas Dandekar ([email protected])

[Editor's note: This article appears courtesy of PharmAsiaNews.com , Elsevier Business Intelligence's source for Asian biotech and pharmaceutical news. Register for a 30-day risk free trial - no credit card required.]