Time to change healthcare focus

Date: 09/05/1996

By Tim Jones

DRUGS price-capping is driving Europe's pharmaceuticals companies into an unprecedented wave of job-shedding, according to one of the industry's leading figures.

“We believe 100,000 jobs have been lost in the last two years in our industry and, in the next year or two, another 50,000 will go. Why is that? We can't increase prices, so we have to reduce our costs in a different way,” says SmithKline Beecham's chief executive Jan Leschly.

This capping of prices is a key reason for the recent round of mergers in the industry, he believes.

This began with the SmithKline Beckman link-up with Beecham in 1989, was followed by Rhone-Poulenc's acquisition of Fisons and the Pharmacia/Upjohn merger last year, and culminated in the creation of the gigantic Novartis from Swiss firms Sandoz and Ciba-Geigy.

Leschly, a 55-year-old former Danish tennis champion who now heads one of Europe's top five pharmaceutical firms with a 9-billion-ecu annual turnover, is frustrated at the lopsided approach of EU governments to controlling spiralling healthcare costs.

“Our concern is that most of the regulation of the European healthcare system is focusing on the drugs bill and not on the overall healthcare costs. Everybody can see how much you spend on a drug, but nobody can see how to get a handle on how much you spend in surgery, hospital costs, nursing homes, home care - on everything that follows because you have not cured the disease,” he says.

“How can we avoid surgery? How can we avoid major physician visits? If you have the right drug, you can reduce overall healthcare costs.”

Take the case of Alzheimer's disease. In the US, the cost of coping with this ailment has reached a staggering 70 billion ecu every year.

“If you could develop a drug that could cure or delay the onset of Alzheimer's disease for just ten years - because it is only elderly people who get it - you could probably save half of that amount.”

Leschly points out that although the drugs bill might rise by 2 billion ecu, global costs would be reduced by 35 billion ecu.

In the EU, different drugs pricing systems have led to a wide variety of prices for the same drug - with the most marked differences between the low prices in the south and high prices in the north - so making it difficult for drugs firms to recoup their research and development costs on a predictable basis.

Suggestions that his company should combat this by only launching its drugs in the high-price countries elicits an angry response from the SB executive.

“Are you telling me that patients in Spain shouldn't benefit from a drug we have developed that can save lives? What is the ethical standing of my company? What integrity would I have if we didn't launch in that market?”

In a series of meetings with Commissioners and MEPs, Leschly has put his case not only for free drugs pricing, but also for a genuine environment of innovation in Europe.

“You just have to look at the number of patents and where they are issued.

It used to be Europe which led the field, but we are now being overtaken by the US and Japan. If you look at Nobel Prize winners - another sign of where science is currently being performed - they are becoming more and more non-European.”

In the growth areas of biotechnology and genomics - the large-scale decoding and analysis of the genetic make-up - Europe is lagging behind, with only around 400 companies across the Union.

“In Pennsylvania alone, there are 150 companies. Why is that? Is it something to do with Americans and their approach to risk-taking?” asks Leschly.

“The idea of an academic, a professor or top scientist at Oxford or Cambridge skipping college and starting up his own company as a business person involved in making money from science is something that is culturally not really accepted in Europe. In the US, you see it all the time.”

Nevertheless, he is convinced Europe can change. “Do I feel it is a lost case? Absolutely not.”