Pfizer chief Read: Lackluster insurance driving pharma's pricing woes
- Ian Read, who has been CEO of Pfizer since 2010 (right around when Lipitor was losing patent protection), turned the company around by cutting headcount, selling off extraneous divisions, and getting more drugs approved.
- Between 1997 and 2011, Pfizer spent $7.7 billion in R&D for each drug approved.
- Read responded to the intense recent focus on high drug prices in an interview with Forbes. In response to the controversy regarding drug pricing, Read focuses on the cost of treatment with medication versus the costs of developing a drug and balances these two against the health benefits of novel therapies. As Read sees it, either insurers pay for a drug, the cost is passed on to companies or patients don't get it.
As a trained accountant, Read brings a certain cost analysis to his job. He focuses on the benefits associated with drugs, citing Lipitor and other statins as an example. According to Read, these drugs generated $1.3 trillion in economic benefits between 1987 and 2008 by prevening heart attacks and strokes. A similar analysis in terms of cancer drugs shows a benefit associated with cancer drugs of $1.9 trillion—and pharma companies enjoying just 19% of the profits.
Read also points out that many insurance plans often pass costs onto patients, which is a big reason for the outrage over high drug prices.
Like other companies, Pfizer raises the prices of old drugs as part of a model that has worked in the past. The cost of Viagra (sildenafil) has increased by 57% over the last three year. During his interview, he also confronts the reality of high prices for cancer drugs, such as Ibrance (palbociclib) for breast cancer, which costs $118,000 per year.
Read can protect these practices on some fronts, but the tactic of raising old drugs' prices may not be sustainable in the current critical environment. But barring stronger insurer (both private and public) pricing negotiations power, the only thing keeping the industry in check at this point is public pressure.