Big bites in Big Pharma

As this next, even scarier phase of the Global Financial Crisis takes hold it appears that Big Pharma is much of its implicit losing political patronage.

The Spanish government is looking to cut its drug bill by €1.3B by demanding price reductions in both the off-patent and soon-to-be-off-patent medications.  By hitting branded drugs as well as generics (i.e. those already off-patent) a signal is being sent by the Minister for Health & Social Policy: -

The pharmaceutical bill rises to nearly €15 million annually and the government becomes the largest customer in this sector...  We demanded a lot to the industry and we believe enough is enough

In the UK the National Institute for Clinical Excellence (NICE) has decided that none of three leading treatments for metastatic colorectal cancer are good value at their current pricing.  This will effect Roche (Avastin), Amgen (Vectibix) and Merck Serono (Erbitux).  The NICE statement said that it was: -

Disappointed not to be able to recommend cetuximab (Erbitux), bevacizumab (Avastin) and panitunmumab (Vectibix) for this stage, but we have to be confident that the benefits justify the cost of the drugs

This is especially bad news for Roche as Avastin, the world's largest selling cancer medication, is under ongoing FDA scrutiny as a treatment for metastatic breast cancer in the US.

Boehringer-Lilly have been scared off launching diabetes medication in Germany due to legal-administrative changes that place a greater onus of the company to ensure that a new drug is value for money: -

Reorganisation of the Pharmaceutical Market (AMNOG), (which) was established in January this year to regulate the pricing of newly approved drugs within their first year.  This means that Germany's NICE equivalent IQWiG and a new Federal Joint Committee (G-BA) now assess a drug's cost-effectiveness against a suitable comparator and if the drug fails to demonstrate its cost-effectiveness, then its manufacturer may be liable to refund the government's Statutory Health Fund, which originally paid for the treatment.

It looks as if the German government called Boehringer-Lilly's bluff.

And all of this in the (somewhat) solvent north of Europe.  As I've mentioned previously, further south the picture is different.  In Greece the government is issuing zero-coupon bonds to pay its pharma bills.  Roche said that the conversion of their debt to a bond amounted to a loss of 26% when the bonds was converted to cash.

Of course as Greece racks up more debt a 26% 'haircut' might look like good value.  Assuming that Greek bonds of any value are still deemed to be assets in the months ahead.